Starting a small business can be overwhelming, particularly when it comes to expenses. As your business grows, you may want to consider a credit card, but how do you decide which one? Each business has different needs, making it crucial that you choose the right card for your business. Here are some factors to help.
Know the basics
Credit cards may seem straightforward, but it's important to make an informed decision, particularly if you're a new business owner. The rules for business credit cards can be different than those of cards for private use. Business cards can only be used for business expenses, so be sure not to charge personal expenses. The CARD Act legislation, passed in 2009, does not apply to business credit cards, which means you must pay your bills on time and in full, and many will want a personal guarantee that the balance will be paid, even if it comes from your own funds rather than business revenue.
Know your credit score
Just like with personal credit cards, credit scores are a huge factor that can determine weather or not you will be approved, as well as influence your interest rates. Knowing your credit score can help narrow down the card that's right for you and your business, particularly when considering cards that require a certain score for approval. For businesses, credit card companies look at both the business owner's credit score and the credit score of the business. Business's establish credit history similarly to individuals.
Charge vs. credit
While the terms "charge card" and "credit card" are often used interchangeably, be aware that they are not the same. Charge cards don't allow you to carry a balance every month and must be paid in full, while credit cards are the opposite. However, charge cards also typically offer better rewards. For small businesses just getting started, revenue and expenses aren't as predictable as for those of more established businesses, making credit cards likely the better choice.
Know your expenses
Part of making an informed decision about the best credit card for your business involves knowing your expenses. While you're likely spending on a variety of things, businesses often have one area on which they spend the most. Like credit cards for personal use, different cards, with their various terms and perks, satisfy different needs. Some are well-suited for office supplies purchasing and services such as cable and internet, while others are geared towards advertising expenses or business travel. There are cards that also offer flat-rate cards if your expenses can't easily and neatly be categorized.
Rewards
As with personal cards, business cards can come with a few perks. Be sure to consider which rewards you're most likely to use and are most beneficial to you. Cards that offer points for spending may award bonus points on certain purchases or match a certain level of spending. To keep costs down, consider cards with zero-percent APR or cash back rewards. If you travel frequently, consider a card with rewards in air miles or if you drive, gas rewards. However, don't choose a card solely for its rewards as the cost of high interest rates or annual fees may not be worth the perk.
This article was written by Janelle Sheetz for Small Business Pulse