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Business credit cards can be a useful tool for the small business owner and in fact are often the first form of financing pursued by many small businesses. Types of business credit cards tend to fall into two buckets – those that offer various forms of rewards tied to traditional business expenses and spending habits, and those business credit cards that offer fewer rewards but come with comparatively lower interest rates.
In both instances, business credit cards serve the important function of separating business expenses from personal expenses while also laying the groundwork for a more efficient experience when it comes time to file taxes. The specific needs and spending patterns associated with a particular small business will dictate which type of business credit card that business should pursue. Let’s take a closer look.
Business Credit Cards - Generous Rewards or Low Interest Rate?
If a small business is relying upon its business credit card line of credit for working capital purposes, then it will make sense to lean in the direction of a card with a lower interest rate, regardless of the rewards perks that will be foregone. The simple reality that the card will be used for financing and working capital rather than general purpose spending indicates that there will be an ongoing debit balance, so it only makes sense to reduce the interest expense associated with the usage of the card over time by pursuing a business credit card with a low interest rate.
Conversely, when a small business has a well-defined spending pattern on office supplies, travel, and the occasional large ticket item, it can make tremendous sense to seek out the business credit card with rewards that are most closely aligned with those spending habits. Business credit cards with generous cash-back and travel rewards programs, for example, can make tremendous sense for the small business owner who can earn cash back and associated perks without altering an existing expense pattern.
Who Should Apply for a Business Credit Card?
Any business owner – large or small – can reap the benefits associated with the usage of a business credit card. A more obvious candidate may be a small business owner who spends significant amounts on office supplies, but sales consultants who travel frequently, as well as independent consultants who entertain clientele, are also viable candidates.
Doctors, dentists and physical therapists who run their own practices and have predictable expense patterns can benefit. Even freelancers, who at times are subject to their clients’ inability to pay for services in a timely manner, can benefit from the security associated with a business credit card, knowing that their own expenses will be manageable when cash flow hits a short-term bottleneck.
Finally, the large business owner who wants to purchase an expensive piece of equipment can look to a high-limit low-introductory rate APR business credit card to finance a big-ticket purchase over many months in lieu of pursuing a small business loan that would likely prove more expensive.
Do Your Own Research
Before applying for a business credit card, it is important to conduct proper research for the card that best suits your needs. The three most important elements to evaluate when considering a business credit card are the quality of the rewards program, the annual APR, and the annual fee associated with the card. Rewards vary from card to card and take the form of points redeemable for goods and services or a fixed percentage of cash back (as high as 5%) on purchases.
Most annual APRs will be 12% or higher, though there are more than a few introductory 0% and low-interest rate promotional business credit cards that are worth pursuing for big-ticket purchases in the range of $50,000 and up. Meantime, annual fees as high as $500 can pose a surprising deal-breaker in some cases, and it is important to evaluate whether the rewards and benefits gained through usage of the card can justify applying for a card with a significant annual fee.
Three Business Credit Cards Worth Investigating
The Chase Ink Business Cash Card offers several advantages, including a 0% promotional APR for 12 months, along with $500 cash back when a cardholder spends $3,000 within the first three months from the date of opening the account. Furthermore, the card has no annual fee and offers 5% cash back at office supply stores as well as on internet, phone and cable services, as well as 2% back from gas stations and restaurants and 1% back on all other purchases.
For small business owners, the SimplyCash Small Business Credit Card from American Express offers a 0% introductory APR for 15 months, has no annual fee, and offers 5% cash back at office supply stores and on U.S. wireless service, as well as 3% cash back on the category of your choice including airlines, hotels, gas stations, restaurants, etc.
For larger businesses with larger expenditures, The Business Platinum Card from American Express can be an excellent fit. Though this card comes with a $450 annual fee, the rewards potential is substantially enhanced for those who travel frequently and spend between $10,000-$20,000 within the first three months of issuance. Rewards points can be quickly and easily redeemed for business class and first class airfares, hotel stays, and access to over 1,200 American Express Lounges located in airports in over 130 countries.