Choosing a Credit Card for Your Business

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Which credit card should you get for your small business? There are many credit card brands and many options to consider within individual brands. Here are things to consider before choosing your small business credit card.

There are many different types of credit cards available these days, and it can be difficult to know which option best suits your business. Answering a few key questions can help identify and prioritize your choices.

How strong is your personal credit rating?
Most credit card companies will look at your personal credit rating even when you are applying for a credit card for your business. In fact, in most cases obtaining a business credit card requires the business owner to personally guarantee the balance will be paid. Thus, the higher your credit rating, the better credit terms you can expect to receive. A credit rating over 700 is ideal, but over 650 will usually suffice. Anything less will earn mixed results in the way of outstanding credit card offers.

Do You Want A Personal or Business Credit Card?
You can use a personal credit card for business, but if you do so, it's advisable for tax and accounting purposes to restrict use of the card to business purposes only. If you use the card only for business, you' won't have to separate personal from business expenditure at tax time, and you'll be able to deduct any interest that accrues if you don't pay off the balance in full each month. For most very small businesses, the main distinction between the personal and the business credit card will be that the personal credit card may offer some protection against rates that suddenly change and other practices regulated under the consumer credit card laws.

Is there a particular store you shop most?
Maybe you’re a home improvement contractor who frequents a lumber supply store. Or, you’re running a desk-based business, and make frequent purchases at an office supply store. If the store you shop at offers a retail credit card, you may want to consider it. Not only will it consolidate monthly expenses into one bill, but it boosts your credit rating as well. Retail credit cards tend to approve cardholders more freely with fewer restrictions. If paid off each month, it can be a great way to prove yourself as a responsible cardholder and catch the eye of general credit card companies. Bonus: Your monthly credit card bill consolidates your tax records keeping, as most of these purchases will be tax-deductible and you will often earn customer loyalty reward points for frequent shopping. These in turn can be redeemed for “free” store merchandise or cash discounts on future purchases.



Do you plan to carry a balance?
If you do plan to carry a balance, or think there will be times when you won't be able to pay off the entire amount at the end of the month, pay close attention to interest rates. The real value of any perks you gain (such as those discussed below) can be totally wiped out by the interest rates when you carry a balance for any length of time.

Do you fly a lot?
Frequent flyer cards can go a long way toward reducing business costs. Apply for either a co-branded airlines card or a general credit card that allows you to book travel with any airline. Seek a card that touts no blackout dates and always compare the fine print to locate the best deal.

Do You Prefer Cash Back or All-Purpose-Rewards Cards?
There are a number of credit card programs for personal or business use that have rewards programs. The programs let you accumulate points for each purchase, and then trade in the points for either travel (as mentioned above), gifts, gift cards, or cash back. These programs, in effect, let you earn money when you spend money, but they often carry a higher interest rate than credit card programs without rewards. They make sense, though, if you usually pay off most or all of your balance each month. If you opt for a card with a cash back rewards program, look to see if there is cap on the amount of cash back rewards you can earn per month or per year, and if so, what that cap is.

Do You Need A Credit Card With A Line of Credit?
Some credit card programs include a line of credit option for businesses. This option lets you write a check to anyone – even yourself- for an amount up to your credit limit. It's handy if you occasionally need funds and don't want to apply for (or can't get) a separate bank line of credit. Before opting for this type of credit card account, be sure you know what fees, if any, you will be charged for using the line of credit.

Once you've decided on what (in addition to credit) you want from your card, look at the cards that have those features, and compare interest rates. 

The right business credit card can offer business owners peace of mind and financial flexibility. Remember, though, that it's very important, to pay attention to fine print items like APR, annual fees and credit limits.

Once you’ve gained approval for the right business credit card, ensure your payment is submitted on time and you keep your spending under limit. Failure to do so will result in astronomical interest rates and monthly charges, ultimately taking a toll on your business.

Copyright © 2012 Attard Communications, Inc.
May not be copied, reprinted, or reproduced without express permission from Attard Communications, Inc.

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About the author:
Janet Attard is the founder of the award-winning  Business Know-How small business web site and information resource. Janet is also the author of The Home Office And Small Business Answer Book and of Business Know-How: An Operational Guide For Home-Based and Micro-Sized Businesses with Limited Budgets.  Follow Janet on Twitter at http://www.twitter.com/JanetAttard.

 
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