How to Choose a Business Credit Card

As a business owner, it’s always a good idea to try to simplify your monthly expenses. This will make them easier to track and will help you out a lot come tax season. And one of the best ways to do this is by opening a business credit card.

A business credit card can help you manage cash flow and earn cashback rewards and other perks. Plus, you can even extend this purchasing power to your employees. 

Let’s look more closely at why business credit cards are so beneficial, and how you can find the card that’s right for you. 

Why Should I Take Out a Business Credit Card?

Cash flow management is one of the most challenging aspects of running a business. It’s common for revenue to vary month to month, which can make it hard to pay yourself and manage your monthly expenses. 

Opening a business credit card can make this process much easier. Some cards offer flexible credit limits and the ability to extend your billing cycle without penalty. 

Plus, a business credit card can help you separate your personal and business expenses more effectively. A credit card makes it easier to track your expenses and quickly identify any tax deductions. And many credit card companies will allow you to export your yearly statements come tax season.

And finally, using a business credit card is a great way to earn cashback rewards. You can take advantage of cashback rewards through a large signup bonus, or tiered point rewards. Here is how each option works:

• Signup bonus: With a signup bonus, you’ll earn a certain number of points for spending a certain amount of money after you sign up. For instance, you could earn 100,000 bonus points for spending $15,000 within the first three months of opening the card. 
• Tiered point rewards: You can also take advantage of tiered point rewards. For instance, you could earn 3% cashback on travel expenses and 1% cashback on everything else. This is a good option if you spend a lot of money on one particular category.

5 Steps to Choose a Business Credit Card

There are a variety of business credit cards to choose from, and the one that’s best for you will depend on your lifestyle and business goals. That’s why it’s a good idea to understand the different types of business credit cards, as well as the features you should be looking for. 

If you’ve never taken out a business credit card before, it may be difficult to know where to start. Here are five steps you can take to find the right business credit card.

1. Understand how they differ from consumer cards

You’re probably quite familiar with how consumer credit cards work. However, business credit cards operate a bit differently.

First of all, business credit cards come with fewer protections than consumer cards. Consumer credit cards are protected by the 2009 CARD Act, but business credit cards don’t fall under these guidelines.

That means your credit card issuer can unexpectedly increase your rates. And they can also shorten the grace period before you’re charged interest on your purchases. For that reason, it’s a good idea to pay your balance in full every month. 

2. Review your main business expenses

The type of business credit card you apply for will really depend on your main business expenses. So take some time to review your operating expenses from the past six months. This will help you identify what areas will benefit you the most.

For instance, let’s say most of your purchases are spent on travel. Then you’ll want a card that doesn’t charge any foreign transaction fees and offers generous travel rewards. 

Or if you spend a lot of time driving, you may want to look for a card that can help cut your fuel expenses. The point is, get a sense for your main spending categories and look for a card that offers rewards in those areas. 

3. Decide what types of perks you’re looking for

Many people apply for a credit card because they want to take advantage of cashback rewards. But this is not the only benefit of taking out a business credit card.

The right card can also provide you with additional protections, like extended warranties on large purchases or travel insurance. You can also gain luxury perks like lounge access with certain airlines. 

And it’s a good idea to see if there are any special financing offers available. Many cards will offer an introductory 0% APR for up to 18 months. This can be helpful if you need to make a major purchase and anticipate needing to carry a credit balance for a period of time. 

4. Decide whether or not an annual fee is worth it

Many business credit cards come with an annual fee, so you’ll need to consider whether or not you can justify this cost. Depending on your desired result, it may be worth it to you to pay the annual fee.

If a card comes with an annual fee, it’s usually because it offers a generous sign-up bonus or cashback rewards. Sometimes these bonuses justify the annual fee, and sometimes they don’t. You’ll have to do the math and figure out whether you want to pay those costs or not. 

5. Consider adding employee cards

If you have employees who regularly make company purchases, then it may be worth it to add on employee cards as well. Many credit card issuers will let you add on these cards at no additional cost. 

Employee credit cards will save you from having to constantly reimburse your employees for business expenses, and you can easily track their purchases. Plus, employee cards can help you meet spending thresholds during the year.  

Bottom Line

Now that you understand why a business credit card is beneficial and how they work, you should be ready to begin your search. Make sure to compare offers from multiple companies so you can find the rates and terms that are best for you.

Contributor’s opinions are their own. Always do your own due diligence before investing.

Keep Reading:

• How We Use Credit Cards
• The Best Personal Cash Back Credit Card
• How To Use Credit Cards to Your Advantage