If you own a small business, getting a business credit card can be advantageous. Not only can you separate personal from business expenses, but tax time will be simpler with your business card’s record of spending, budgeting may be easier once you see what you’re buying, and you’ll nab rewards, points or cash back depending on the type of card you choose.
“Establishing a credit card in the name of your business is generally the first step toward building a relationship with your financial institution,” says Jim Salmon, vice president of business services at Navy Federal Credit Union.
Two things to keep top of mind before shopping for a business credit card:
1. Check the consumer protections: Business credit cards aren’t covered by the Credit CARD Act’s consumer protections, which bar sudden hikes in interest rates and over-limit fees. Though many issuers of business cards have adopted the practices instituted by the 2009 Act, read the fine print for any business card before applying.
2. Your business credit can impact your personal credit: If you’re the sole proprietor or a business owner with fewer than 20 employees, your personal and business credit scores are closely linked in the eyes of banks and lenders, according to Experian, one of the three big credit bureaus. In general, you’ll need good or excellent credit to be approved. Also, some card issuers report both positive and negative information about business cards on the owner’s personal credit history. Others may report only negative information. Be aware of the way your business finances can affect your personal finances.
“When comparing rewards programs, choose one without spending limits or other restraints on how you can use the points.”
— Jim Salmon,
Navy Federal Credit Union
Now that you know the differences between business and consumer cards, here is a six-point checklist to help you pick the business card that best meets your company’s needs:
1. What’s the annual fee?
The annual fees on business cards are usually higher than on personal cards. Most annual fees are around $100, but some can be much more. For example, the AmEx Business Platinum’s $450 annual fee won’t make sense for every business.“
“Some cards, such as Chase Ink Business Plus, charge an annual fee, but they have excellent sign-up bonuses and rewards programs that can outweigh those fees,” says Priyanka Prakash, finance specialist at FitSmallBusiness.com, an educational site for small business owners and entrepreneurs.
For example, that AmEx Business Platinum card offers a sign-up bonus of 40,000 rewards points (at times that bonus has been 100,000 reward points) if you spend $5,000 within three months. In addition to the sign-up bonus, there are a host of VIP perks with these business credit cards, such as airport lounge access and airline fee credits. If you choose a card with an annual fee, weigh it against any perks you’ll receive.
2. Check the interest rate.
The APR for business cards ranges from 11.49-23.24 percent, with an average APR of 13.12 percent. If you plan to keep a balance from month to month, make sure you’re aware of the APR of the card you select.
Business credit cards often charge a slightly higher APR than low-interest consumer cards and are not subject to the same laws on penalty APRs as consumer cards. “That means your APR can be increased without notice if you fall behind on payments,” says Prakash.
3. Go for rewards.
“Take a good, long look at what the rewards programs are offering,” says Salmon. “Make sure you’re getting rewards points for products and services that match your needs.”
If you’re a road warrior, you’ll benefit from travel points to use toward flights and hotel stays. If your largest expense is office supplies, cash back from office supply stores are a boon. If you drive often, gas rewards rock.
Mark Aselstine, founder of Uncorked Ventures, an online wine retailer, spends about 15 percent of net income on shipping charges. “Shipping wine is expensive, so our corporate AmEx, which pays three times points for one category of spending, comes in awfully handy.” For Aselstine, those points add up for a big savings on Uncorked’s shipping costs.
“When comparing rewards programs, choose one without spending limits or other restraints on how you can use the points,” says Salmon. As with any card, read the credit agreement carefully.
4. Reward points or cash back?
Business credit cards can reward you with points for spending, or a percent cash back (usually 2 percent). Many business owners opt for the cash, although that’s not always the best option for everyone. The value you get in hotel and airline miles from using a rewards card can far exceed whatever cash you get back with another card.
“Shipping wine is expensive, so our corporate AmEx, which pays three times points for one category of spending, comes in awfully handy.”
— Mark Aselstine,
founder of
Uncorked Ventures
For example, if you spend $70,000 in business purchases with a Capital One Spark Cash for Business card, you’ll get 2 percent back, or $1.400. But if you spend $70,000 on a CitiBusiness AAdvantage Platinum Select Card, you’ll rack up 70,000 points (more if you earn double points on business categories), which could be used to buy a business-class ticket from New York City to Hong Kong . If you don’t need to travel, of course, take the cash.
5. Which rewards match your business needs?
Most cards award 1 point per $1 spent. Some cards offer additional points through bonus categories. The American Express Business Gold card includes 3 points per dollar on a category of your choice, including shipping, advertising, gas stations, etc. The Chase Ink Business Plus card awards 5 points per dollar on office supply stores, phone and Internet bills. The Southwest Premier Business card includes 2 points for each dollar you spend on Southwest flights. Determine what your business spends money on and select the card that awards the most points for that.
Allen Walton, founder of SpyGuySecurity.com, an online spy and surveillance retailer, spends considerable amounts on online advertising, so he uses the AmEx Gold card. “If I spend $10,000, I get 30,000 AmEx Membership Rewards points, which can then be transferred to various airlines and hotel programs.”
6. Make the most of affiliated loyalty programs.
If you’ll be using points for flights, pick a card that’s partnered with an airline loyalty program that has an airline with a hub near your city. You want to get a card that awards points for the airline that you use most frequently. Southwest Airlines has Rapid Rewards Premier Business by Chase, American Airlines has AAdvantage CitiBusiness. Delta Reserve for business offers SkyMiles through AmEx. JetBlue’s business card, which was an American Express card, switched to MasterCard early in 2016 and offers additional rewards now, card rewards website ThePointsGuy notes. Other airlines have their own cards too.
Geoff Sharp, owner and founder of Sharper Impressions Painting Co., uses the Southwest Visa card. “This gives us points with Southwest that we can utilize for any and all employee travel. We have found that Southwest has some of the best travel points return in the industry.”
In fact, Sharp used the card to provide all employees with flights to the annual company seminar, saving thousands of dollars, he says.
No matter which card you select, carefully review the annual fee, interest rate and rewards specifics to choose the card that best reflects your business spending. With numerous choices available, endless reward options and an array of perks, having good personal credit and doing your homework is key to snagging the best business credit card for your company.
