By Meredith Wood
Business credit cards come with what can seem like an endless variety of perks: cash back, airline miles, hotel points, special travel upgrades, a host of discounts—the list goes on and on. Along with the fun and exciting perks, come more practical benefits—things like low introductory APRs, reduced fees, or special rates for balance transfers. Like all good things, though, these benefits come with a degree of consumer responsibility.
You owe it to yourself to find the best business credit card for you. This means thoroughly researching your options and carefully choosing the card that best fits your financial situation and gives you fun perks that you will actually use.
Before you commit to a credit card for your small business, investigate these questions to make sure you’re making the best choice.
1. What do you need?
Consider your short, medium, and long-term financing needs. If you’re just starting out and need to establish credit, a secured credit card may be the way to go in order to track monthly expenses in one spot and get some credit on the books.
Or, if there’s a high-priced piece of equipment or machinery that you need to buy soon, you may be a better candidate for a credit card that doubles as a small business loan vehicle. In this case, a card with a zero percent APR for a generous period may suit you well. It’s good to know your goals so that you can both direct your search and select perks and offers that match your needs.
2. What will your monthly balance be?
Do you plan to pay off existing debt and use the card as an ‘emergency only’ medium, or are you more likely to float cash from month to month to cover the cost of doing business? Whichever the case, you’ll want to figure out a range of what your ongoing balance will be, as well as whether you will be paying it off monthly or not.
Keep in mind that one of the things the credit bureaus look at to assess your creditworthiness is your monthly balance. This is an indicator of how much lending you can qualify for in the future. Keeping a balance every month can affect your debt ratio—even if you pay it off monthly. This is good to keep in mind as you evaluate the many options for business credit cards out there for you.
3. Did you read the fine print?
It’s impossible to understate the importance of reading the fine print in a credit card contract. An introductory APR offer or zero percent balance transfer can be a great asset to your business—but you need to watch out for hidden fees. You should ask questions about when the balance of a big-ticket purchase or high-dollar transfer is due. In addition to watching for transaction fees on the up-front purchase, you also want to be aware of the date that the interest rate on the purchase increases or penalty fees and increased interest rates if you make a late payment.
4. What’s your rate?
When you sign up for a new credit card, you should always know your interest rate and the factors that may cause it to fluctuate. As you shop around, you will see cards at higher and lower rates. It’s important to consider the rates along with your planned usage of the card, plus other fees including transaction fees, annual fees, and other benefits.
5. When will you pay the card balance off?
Whether you plan to pay off your credit card monthly, or more—or even less—often, we suggest you commit to a payoff plan in advance. You should also build in contingencies, which will lessen stress in the unknown.
6. What kind of rewards do you want?
Weigh the benefits of cash back, travel perks, points toward retail purchases, and the other offers out there on the market. Do keep in mind that travel, retail, and points rewards do come with expiration dates, so really think through what you will actually use. You don’t want the disappointment of moving your finances around in order to accumulate points if you eventually can’t use them.
Auditioning business credit card offers and reviewing their fine print is a process that pays so much more than its bonus perks. It gives you a sound foundation on which to finance and grow your business.
Meredith Wood is the editor-in-chief at Fundera, an online marketplace for small business loans that matches business owners with the best funding providers for their business. Prior to Fundera, Meredith was the CCO at Funding Gates. She is a resident Finance Advisor on American Express OPEN Forum and an avid business writer. Her advice consistently appears on such sites as Yahoo!, Fox Business, Amex OPEN, AllBusiness, and many more.