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How to choose a small-business credit card

Small businesses are a major force driving the U.S. economy. But until relatively recently, credit card companies did not market directly to small businesses. After all, small businesses are known to fail at an alarming rate. The prosperity of the late 1990s brought a rise in profitability among these little enterprises. Starting around that time, the major credit card issuers began a rush to create credit cards that would appeal directly to small businesses. As a result, if you are a small business owner, today there are a range of credit card options to fit your needs and budget, as the credit card companies continue to expand into a segment of the market that is comparatively less saturated than that for consumer credit cards.

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Why would you need a small business credit card? Since most entrepreneurs already have at least one personal credit card, wouldn’t it make sense to charge their small business expenses on that card as well? In fact, a small business credit card offers some distinct advantages over a consumer credit card. A small business credit card will help track your business expenses independent of your personal expenses and also enable you to measure the company’s budget. At tax time, having a separate record of your small business spending will make the process that much easier. Additionally, you may want to be able to issue credit cards to your employees for business use. Meanwhile, small business credit cards can save you money through the various perks they provide. And they help you build a credit history in the business’s name.

Once you decide that your small business needs its own credit card, it is time to choose the best credit card for your business. As with any credit card decision, there are a number of factors to consider.

What is the credit card’s annual percentage rate? If you expect to carry a balance from month to month, it is important to seek out the lowest APR you can find.

Does the credit card charge fees? Annual or other fees can eat into the savings your credit card is supposed to offer, so make sure any fees do not cancel out the perks a small business credit card provides. If you do have to pay a fee, you can probably deduct it as a business expense on your taxes (but check with your accountant to be sure).

When it comes to those perks, what type will provide the most benefit to your company? You will probably want to earn cash back rewards or discounts on the goods and services your business uses most, like air travel, shipping, copy and printing services, or computer hardware and software. If you travel often on business, you may want to find a credit card that offers bonus miles with no blackout dates. Small business credit cards generally have no cap or a higher cap on the amount of cash back or reward points you can earn on an annual basis when compared to consumer credit cards.

Will the credit card help you thoroughly track your business spending? Small business credit cards offer reports on spending that vary in detail and frequency. Perhaps the credit card you need will allow you to customize the reports you receive. You might want a credit card that allows you to read the reports online and then download them directly into your accounting program.

What sort of flexibility does the credit card offer when it comes to setting limits on your employees’ spending? You may want certain employees to have stricter limits on how much they can spend as well as restrictions on their access to cash.

Is the credit card widely accepted? Business owners who travel will want to make sure that their credit card is accepted when they need to charge something while away from home. A major Visa or MasterCard credit card might prove to be a better choice if this is a concern, although acceptance of American Express and Discover Card is beginning to rival these two giants. Business owners who find themselves or their employees frequently on the go will also want to make sure the card has a national ATM network to provide cash after hours or in airports.

Does your travel take you overseas? In this case, Value Added Tax reclaim provides an easy way to recoup this foreign tax.

Would you like to be insured? Some credit cards will offer travel insurance, purchase insurance, additional car rental insurance and lost card insurance.

Do you appreciate the ability to always be able to reach someone at the credit card company by phone? If you do, select a card with 24-hour telephone travel and concierge services.

The best credit card for a small business owner will depend on the unique character of the business. Regardless of the type of company, having a small business credit card will be beneficial for you. Just remember to continue to use your personal credit card for personal expenditures, as putting nonbusiness expenses on a business credit card can make it difficult to keep track your expenses separately.

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Published: January 29, 2006

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Credit Card Rate Report Updated: August 21st, 2019
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