How to Choose the Best Credit Card for Your Business

Need a credit card for your small business? Not all business credit cards are created equally, so consider these 10 points when choosing one for your business.

If you’re looking for a business credit card, you know there are lots to choose from. Every major issuer has a special card for small business owners. The names might be catchy, but how do you pick the right card for your business?

1. Make sure you can get approved for a business credit card

Money isn’t pouring in yet. You have bills and expenses due today, but that big check from a client is running late. A major piece of equipment broke, but there isn’t enough money in your bank account to cover the cost. This is when a credit card becomes a lifeline.

As a young startup, you’re not likely to secure a line of credit from a bank or investor. Your best bet is seed money from family or friends, but maybe you’ve exhausted that option or you don’t want to give up any equity in the company. A credit card may be the perfect way to cover expenses when cash is running low.

Did you know that businesses have a credit file, too? Your D&B (Dunn and Bradstreet) score is the business equivalent of a FICO score. In order to build your business’s credit score, you have to utilize credit. Since credit is hard to secure at first, a good way to build your score is through the use of a credit card.

Also note, most credit card companies will look at your personal credit rating even when you are applying for a credit card for your business. In fact, in most cases, obtaining a business credit card requires the business owner to personally guarantee the balance will be paid. Thus, the higher your credit rating, the better credit terms you can expect to receive. A credit rating over 700 is ideal, but over 650 will usually suffice. Anything less will earn mixed results in the way of credit card offers.

Regardless of what card you get, be careful. Overspending can lead to disaster. Just as credit cards have driven families into bankruptcy, they can do the same with small businesses. Don’t use a credit card to buy what your business can’t afford. Use it to cover expenses until payments from customers arrive.

2. Be realistic

Are you going to pay the charges in full each month? If you are, look at rewards cards. Getting a free flight simply by using your card is a great deal. There are some that offer travel rewards, cashback (in the form of statement credits), and other perks.

But those rewards are small compared to the interest you pay if you carry over a balance. If you’re paying interest, you’re quickly wiping out any reward you receive.

If you’re going to hold a balance, first look at the interest rate. If you’re disciplined enough to not carry over a balance, look at the quality of the rewards.

3. Keep yourself honest

A credit card and a charge card are different. A charge card requires that you pay the balance in full after a certain period — often after one month. A credit card allows you to roll over the balance month to month. The American Express Plum card is considered a charge card. It gives you 60 days to pay without any charges and offers a discount if you pay early. After 60 days, charges apply.

4. Look at the terms

Do you travel outside of the country for your business? Make sure your card doesn’t have a foreign transaction fee. Foreign transaction fees can add up to 3% in fees to anything you buy outside of the country. If you need to use the card outside of the U.S., look for one that doesn’t have foreign transaction fees. One way to find out: search the Internet for the name of the credit card and the term “foreign transaction fees.”

5. Be careful of the teaser rates

That 0% introductory APR is certainly enticing, but what happens after it expires? Before reading the pretty, colorful ad copy on the credit card’s home page, find the disclosure page — normally a link at the bottom. Read about the rates and fees and then go back and read about the card benefits.

6. Dig deep into the rewards program

After deciding which type of rewards program fits you the best (travel, cashback, etc.), read the fine print. If you’re looking for travel rewards, make sure the card company offers rewards for your airline of choice. If you’re already a super-double-diamond-high-roller flyer with a certain airline, you want a rewards program that works with that airline.

If you have a lot of vehicles, a credit card that offers bonus points for gas purchases is certainly a plus. Or, you may just want a business credit card that offers double points on all transactions.

Related: Review the Benefits of Credit Cards for small businesses

7. Consider whether you need a card with a line of credit

Some credit card programs include a line of credit option for businesses. This option lets you write a check to anyone (even yourself) for an amount up to your credit limit. It’s handy if you occasionally need funds and don’t want to apply for, or can’t get, a separate bank line of credit. Before opting for this type of credit card account, be sure you know what fees, if any, you will be charged for using the line of credit.

8. Learn how extra cards work

How do you get extra cards for your employees, and is there a fee? Can you set spending limits on employee cards? Some business cards come with an impressive list of ways to monitor and limit employee spending. Others offer nothing more than the ability to add an additional authorized user.

9. Understand the potential penalties

You don’t plan to make late payments, but what if it happens? Do you lose your rewards points? Is there a penalty APR that goes into effect? What is the late fee? Sometimes paying bills a little late is unavoidable. As you’re shopping for a card, compare those terms and conditions, as well.

10. Beware the annual fee

Some cards have a lot of perks: concierge services, purchase protections, free insurance for your rental car, and more. But is it worth a hefty annual fee?

Bottom Line

Credit cards can be risky. Small business owners and startups often have to personally guarantee the credit card. Used irresponsibly, a credit card could lead you and your business to irreversible financial stress. However, when used cautiously, your business credit card could provide a short-term solution for cash flow issues.

Just like you would a credit card for you and your family, compare multiple cards. Read more of the boring disclosures than you do the pretty advertisements. And always pay the entire balance at the end of the month.

And remember, once you’ve secured the funding you need for your business, one of the next steps to profitability is making sure your customers are paying you. Our ZenBusiness Money app makes it fast and simple for small business owners to get paid. You can use it to easily send custom invoices, accept credit card and bank transfer payments, and manage your clients from an easy-to-use dashboard.

Disclaimer: The content on this page is for information purposes only and does not constitute legal, tax, or accounting advice. If you have specific questions about any of these topics, seek the counsel of a licensed professional.