Does your company need a business credit card?
3 reasons to get one – and 3 reasons you shouldn't
Business consultant, frequent flyer aficionado
The allure of a business credit card is strong, especially the fancy perks, frequent flyer points-earning opportunities and other advantages. A business card doesn’t make sense for all entrepreneurs or companies, though.
To help you decide, we’ve listed three reasons your company needs a business card and three reasons it doesn’t.
Why you need business credit card:
1. You spend five figures or more annually on your business
Nearly all business expenses (office furniture, airline tickets to conferences, office supplies) can be put on your business credit card, all earning points, miles or cash back.
The amount of your business spending directly impacts the rewards you can earn with a high-end rewards card.
For instance, spending $25,000 annually on communication services could equal 75,000 Chase Ultimate Rewards points with the $95 annual fee Chase Ink Business Preferred Credit Card (3x points on internet cable and phone services) or 125,000 points with the no annual fee Chase Ink Business Cash Credit Card (5 percent on up to $25,000 of those same expenses per year).
In either case, that’s more than enough points for a round-trip airline ticket – and could even cover a couple of airfares with 125,000 points.
It all comes down to the benefits you gain from your spending justifying the annual fee of the card.
See related: Best small-business credit cards of 2018
2. A significant part of your budget is travel and/or food
Cesar Kuriyama, founder of the popular app 1 Second Everyday, spent the past month in Russia, France and London. Kuriyama said travel more than makes up for any annual fees, specifically for the $450 annual fee Chase Sapphire Reserve.
“I get a $300 annual travel credit, which I very quickly get back in the new year, free Priority Pass to access business lounges all around the world,” Kuriyama says. “When the time comes to renew my Global Entry/TSA Precheck, this card will cover it.”
Yes, some entrepreneurs and companies rely on consumer credit cards instead of business credit cards. There are differences, though. The consumer protections in the Credit CARD Act don’t apply to business credit cards.
The Citi Prestige ($450 annual fee) as well as its sister card, the Citi ThankYou Premier, offer double and triple Citi ThankYou points for flights, hotels and food, as well as a Global Entry/TSA Precheck credit and other travel benefits.
3. You and/or your team spend most of the year of the road (and in the air)
Travel perks often are the biggest draw of a business card, from priority boarding, TSA-Precheck/Global entry credit to access to airport lounges.
That’s just for starters, though. With the The Business Platinum® Card from American Express (annual fee $450), for example, there’s a $200 airline fee credit, Gogo Wi-Fi passes for in the air and a concierge service to help with business needs on the ground.
If you and your team will be hop-scotching the U.S. or the globe, the perks of your business credit card – relaxing in airport lounges before your flight, speeding through security, boarding early and free in-flight Wi-Fi – will make traveling a lot easier.
Why you may not need a business credit card
1. Your annual business income fluctuates significantly
As an entrepreneur, consultant or other independent worker, your annual income can vary widely. Paying $350 or more for a credit card’s annual fee may have seemed worthwhile when you first got it, but has become a burden ever since.
Regularly reevaluate the high-end cards you have. Note when the annual fee will renew, then decide how much you benefit from each card before the renewal date.
If you want to keep the card, but aren’t sure you’re getting your money’s worth from the annual fee, call your card issuer. You may be offered a bonus to keep that card, or the issuer even may lower or waive the card’s annual fee.
Sometimes life changes (not business income changes) can spur a reassessment of the credit cards in your wallet.
For example, you may not travel as much as you did before, or other card perks, such as cash back, could add value to your bottom line.
2. You won’t take advantage of high-end perks
“We don’t own the higher-end cards – they offer incentives that are not appealing to me and my wife,” says Matt Baron, owner of Inside Edge: Public Relations & Media Services. “We don’t travel enough to justify this approach.”
The logic here: Figure out if you will maximize the benefits of a credit card. Lounge access, free upgrades and other enticing perks sound amazing, but are useless unless you are in the position to take advantage of them.
Baron found that his business benefitted most from the no-annual-fee Blue from American Express®.
It helps, too, when your card issuer has your back.
“After returning from a vacation, I noticed that my American Express card had been charged for tolls incurred while I drove a car rental. However, I had already covered those tolls through my car rental payment.” Baron says.
“AmEx swiftly went to bat for me and took care of having those incorrect charges reversed.”
3. You are spread too thin financially
No business or travel credit card benefit is worth jeopardizing or stretching your budget. The biggest key to deciding on a business credit card isn’t figuring out if you could use it, but if you need it now.
Once you are again on solid financial ground and have a clear handle on your business spending, it is easier to see how a credit card – and the right perks – can help grow your business.
And regularly reassess the cards in your wallet. Are you getting your money’s worth?
“If you do the math with the perks,” Kuriyama says of his cards, “the annual fee easily pays for itself.”
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