HOW TO CHOOSE A SMALL BUSINESS CREDIT CARD
A small business credit card is an important asset for any entrepreneur. These specialized cards help you manage your cash flow and finance your business while offering you the chance to earn valuable rewards for every dollar you spend.
In this article, we will cover what types of rewards to consider, potential card fees, interest rates, other types of benefits to consider, and how to make the right choices for your own business.
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Consider Rewards Programs
If you want credit card rewards, you’ll typically find them in the form of cash back or travel rewards:
Cash Back Rewards
Cash back rewards cards generally start at a flat rate of 1 percent and can sometimes go up to 5 percent back in some categories with bonuses. Some cardholders prefer a simple, flat-rate program where they don’t have to think about which card to use at each merchant. Others don’t mind a little more complexity to earn better rewards.
For example, the Ink Business Cash from Chase offers 5 percent cash back on office supply store and telecommunications purchases. This deal is good for the first $25,000 in annual purchases. Cardholders get 2 percent back on up to $25,000 in purchases per year at gas stations and restaurants. It offers 1 percent back on everything else. On the other hand, Capital One offers a flat-rate card and offers an unlimited 2 percent cash back on all purchases.
If you prefer cash back rewards, be sure to compare the rewards rate across cards to pick the one that is best for you. That comparison isn't always as simple with miles and points rewards, as values may vary in each program. Still, however, looking at the earnings rate on various categories between cards can give you an idea of which offers more for every dollar you spend.
Recommended: Check out our list of the 5 best small business credit cards for earning cash back.
For travel rewards, you can find general rewards cards from major issuers like American Express, Chase, and others. Your other option is an airline or hotel branded card, which can come from many of the same issuers as the general rewards cards.
Instead of cash back, you’ll get travel miles or points, which you can redeem for rewards like:
- Discounted flights
- Hotel nights
- And a whole lot more.
In many cases, you can get more than 1 cent per mile or point in value. This means you can sometimes get better value from travel rewards than you can from cash back. But that’s only the case if you frequently travel.
Like cash back, there are different types of travel reward cards. For example, some cards give you multiple points per $1 spent up to a certain amount per year on travel, shipping, telecom, and online advertising, while offering only one point per dollar everywhere else. Others offer a flat rate, such as two points per dollar, up to a certain amount.
If you are loyal to a specific hotel brand, airline, or other travel company, check to see if they have their own card. In many cases, you can earn toward their respective rewards program and get other perks and benefits at the same time.
Recommended: Check out our list of the 6 best small business credit cards for earning travel rewards.
Fees are one of the two major types of expenses from a credit card. Here is a quick list of common fees you may come across:
- annual fee
- balance transfer fee
- cash advance fee
- foreign transaction fee
- late payment fee
- returned payment fee
Obviously, fees are something you generally want to avoid. You can almost avoid every fee on this list—with the exception of an annual fee—by avoiding specific fee-bearing activity.
Annual fees might seem like a bad thing at first, but there are many reasons to choose a credit card with an annual fee. For example, some premium travel business cards have a fee of several hundred dollars or more, but they include access to luxury airport travel lounges and other benefits.
Also, consider the value of the rewards and benefits to your business compared to the annual cost. Depending on your spending habits, you could easily make back enough to cover the annual fee of many popular cards.
Many travel rewards cards don’t have foreign transaction fees. Look for this feature if you often travel abroad for business.
Recommended: Visit Divvy to apply for their business credit card, earn points, and build your business credit quickly.
Interest can be the biggest cost of a credit card—or no cost at all. If you pay off your card in full by the statement due date each month, you’ll never pay interest. If you don’t pay it off by that date, you’ll pay an interest charge based on the card’s interest rate.
Interest rates can vary based on your credit history and other factors. If you plan to pay off the card in full every month, you don’t have to worry about this number. If you plan to carry a balance, the interest rate is the most important number to look at when choosing a new card.
A credit card does more than allow you to pay for purchases and earn rewards. Many feature benefits that are a big value in their own right. Here are some of the cardholder benefits to look for in a small business credit card:
Purchase Protection and Benefits
Many cards offer purchase protection. These policies can replace or repair eligible purchases for a certain period of time if you make the purchase on the card. Other popular benefits include return protection, damage and theft protection, extended manufacturer’s warranties, cell phone insurance, and more.
Travel Protection and Insurance
When you hop on a plane and jet off from home, it’s nice to know that someone has your back. Many credit cards include rental car insurance, which can save you a bundle.
Look for travel disruption insurance, roadside assistance, and other benefits. Travel emergency insurance can help you if you have a serious problem, but you may have to pay extra for services rendered. In the event of a delay, disruption, or other issues that may arise when traveling, this is very helpful.
Premium credit cards may add even more benefits. Some cards are quite unique, but here are some common and useful benefits to look for:
Airline Travel Benefits
Checked bags used to be included with your ticket at every airline. These days, only some international flights and Southwest Airlines include a checked bag. Some cards offer free checked bags and priority boarding. You might even get a discount on in-flight purchases.
Airport Lounge Access
The best premium cards include access to executive lounges at airports, hotels, and other locations. Cards like American Express Business Platinum include this type of perk.
Travel Program Status
Gold status can get you into lounges at hotels, which is a nice getaway that can include free food and drinks. Status sometimes includes early and late checkout, free faster WiFi, upgrades when available, and other perks. Airline and hotel-branded cards are the most common to offer this kind of status.
Some cards give you an option to call a number for a dedicated concierge service that can help you book flights, hotels, restaurant reservations, event tickets, and more.
Before you pick a card and start filling out a credit card application, there is one last place to check: credit card sign-up bonuses. Some cards come with big offers worth up to thousands of dollars in cash back or travel.
Bonuses change frequently, and premium cards tend to offer better bonuses than cards with no annual fee. For bonuses, timing is everything.
To earn a bonus, most cards require you to meet a minimum spend requirement in a certain time period. For example, a credit card might require $5,000 in new purchases within the first three months of opening a new account.
If you get a card with a sizable bonus, make sure to spend enough by the end date to get your miles, points, or cash back.
You can Always get More Than one Card
If you’re searching for a small business credit card and find two that you love, what should you do? In many cases, you can get both and earn a combination of rewards that make the most sense for your needs and preferences.
When it comes to small business credit cards, one thing is certain: every small business should have one. If you follow these guidelines, you should end up with a card perfect for your small business needs.
TRUiC has partnered with CardRatings for our coverage of credit card products. TRUiC and CardRatings may receive a commission from card issuers.