How to Choose the Best Credit Card for Your Business

Choosing a Business Credit Card

When it comes to business finances, choosing the right business credit card is a must. Not only is a credit card important in establishing your business credit history, it is also a viable line of credit that your business can benefit from during periods of financial instability. Likewise, business credit cards are a great resource for separating personal and business expenses.

As with any form of credit, business credit cards are only as beneficial as you make them. If you spend and pay credit card debt wisely, business credit cards can be a great resource for you now and in the future. On the other end, if you are not responsible with your spending and repayment of debt you can encounter financial trouble. So be mindful of these dynamics when considering which credit card is best for your business.

Aside from issues related to personal responsibility, I have outlined some other elements that you should consider when applying for business credit cards. This list is organized according to level of importance as certain elements should take priority over other elements when it comes to acquiring a business credit card.

Credit Card Networks 

The first thing you should consider is the credit card network that corresponds to your business needs. There are four major credit card networks that offer both personal and business cards. American Express, Discover, MasterCard, and Visa are the most common credit card networks both in the U.S. and abroad.

American Express (AMEX) and Discover are both credit card networks and issuers. This means that these companies provide and offer their own credit cards to consumers without the use of a third party. However, American Express does work with some issuers such as Bank of America, USAA Bank, and Wells Fargo.

Visa and MasterCard are almost exclusively offered through third-party issuing financial institutions such as Capital One, Chase, and Citibank. Because these financial institutions issue Visa and MasterCard branded network cards they set their own terms, fees, rates, and benefits for their individual cards.

A credit card network is important because of its acceptance rate in the U.S. and abroad. Visa and MasterCard networks are accepted virtually everywhere globally. This obviously makes them a more popular choice for some business owners because of their level of flexibility.

American Express and Discover Card networks are accepted by many merchants, however, they are accepted at fewer places than Visa and MasterCard networks. Also, while the global reach of these networks is expanding it is fairly limited in the international arena in comparison to Visa and MasterCard.

On the other hand, both of these networks have amazing benefits and perks that are also attractive to business owners. In fact, American Express is my favorite network and it is the card that I use most often for personal and business finances because of it’s many other advantages.

As a business owner, you are not limited to one credit card network or issuer. You can have as many business credit cards that your company qualifies for. That being said, it may be a wise strategy to have two or more business cards from different networks and/or issuers. Having multiple credit cards can benefit your organization in a number of ways, which I will discuss later in this post.

There is no magic number of business credit cards that you should acquire. It all depends on your business needs. I personally have two business credit cards and I will possibly get a third one in the near future. Although American Express is my favorite card card, I also maintain a Visa credit card because AMEX is not accepted everywhere. I personally don’t like carrying too many credit cards so I maintain a limit of six credit cards for combined personal and business purposes.

Annual Fees

The second major consideration is the annual fee, which can range from $0 to $550 and sometimes more. While it may not seem like it from the outset, credit cards with high annual fees are oftentimes more beneficial to have than those with no annual fees. Of course, this is all relative to your situation and your business needs.

Zero percent annual fees are usually more appealing to business owners who wish to maintain low overhead costs or for those who don’t usually take advantage of benefits and reward systems. However if your business operations include frequent travel or credit card use, some premium cards with variable annual fees may be a good option for you.

Keep in mind that annual fees must be paid regardless of credit card use. So if you don’t use your business card frequently or you are not interested in the benefits or rewards available to you it may be best to select a no or low annual fee credit card. On the other hand, if you plan to use the card on a regular basis and/or if you desire certain card rewards, mid to high range annual fee cards may be a better option.

In the same way that you can get business credit cards from multiple networks and issuers, you can also get credit cards with variable annual fee rates. You may want to consider having one or more card with no annual fee and at least one card with an annual fee so that you can take advantage of certain rewards. Aside from the benefits and rewards that annual fee-based credit cards offer, business credit card annual fees are also tax deductible. This tax deduction does not apply to personal credit cards used for business-related purchases.

Annual Percentage Rate 

The third major consideration is the annual percentage rate (APR) more commonly referred to as the interest rate. This is the amount that you pay on balances that you carry from month to month. This can range anywhere between 13.99% to 24.99% or more depending on the type of card that you have.

Business credit card rates are based on a number of factors including prime rates, business credit history, reward programs, etc. Credit history is definitely a defining factor in interest rate assignment, however, it is usually not the greatest factor when it comes to cards with reward programs.

I consider the interest rate to be secondary to the annual fee because it is completely within the control of the card holder. If you don’t carry a balance, you don’t pay interest. However, if you do carry a balance you will pay a penalty from month to month. So while the APR should be examined when applying for business credit cards, your spending habits should also be a deciding factor in regards to the APR that you accept.

Benefits

The fourth thing you should think about is the card benefits. Every business credit card comes with a standard set of benefits. Such benefits are automatic and do no require the cardholder to make purchases or participate in other activities in order to redeem them. These benefits usually include fraud alerts and protection, car rental insurance, purchase protection, extended warranties, concierge services, etc.

While often overshadowed by glamorous reward programs, credit card benefits can be quite useful in many cases. They can save you from purchasing rental insurance during business trips or provide you with road side assistance. They can help you stay on top of your credit history by providing you with monthly credit score reports and instant credit activity or fraud alerts among other things.

Reward Programs

There is so much competition among credit card networks and issuers in today’s world that it can be complicated trying to decide which credit card is right for your business needs. All major credit card issuers have established comprehensive reward systems at every tier. And this is the main way that they entice credit card consumers.

As a result, most prospective credit card applicants focus on the benefits of the card before considering the above-mentioned factors. While reward systems can certainly make the case for selecting one card over the other, it should not be your top motivating factor when selecting a business credit card. Instead, it should actually be the last motivating factor.

While sign-on reward offers can appear quite enticing it is very important to read the fine print. Some of these perks are temporary, which means that they decrease in value or altogether disappear after an introductory period.

That being said, many reward systems can be quite handy at times. In fact, some issuers have very comprehensive and advantageous reward systems that are definitely worth the cost of the annual fees. In general, the higher the annual fee the greater the benefits you reap from the reward program. Some of the most common rewards include cash back, points, and travel.

Cash Back

Cash back reward systems generally range anywhere from 1-5% for every dollar spent. Usually the more cash you get back, the higher the annual fee. Sometimes the annual cash back rewards that you receive simply offset the annual fee. In which cash, you don’t lose or win anything. However if you spend enough or you have a no-annual-fee cash back reward system, you may be able to pocket a decent amount of cash every year.

Business credit cards

A number of cash back reward systems also come with some quite generous sign-on bonuses. For instance, you may have to spend $3000 within the first three months of opening your account to get $500 worth of bonus cash back. In which case a $95 annual fee is covered 4 times over.

Cash back rewards are generally the most versatile of the most common reward systems. When you get cash back you can spend it however you please. You are not locked in to using it with one vendor or on specific items. Yet, at the same time this type of reward system is very flat. It generally doesn’t come with other perks and it is solely based on how you use your business credit card.

Points

Points-based reward systems are similar to cash in that they are usually flat-rate programs that only include points. They are also fairly versatile in terms of the rewards that are available through the program. However, it usually takes longer to receive these items because they have to be processed and mailed to you. It can take anywhere from 2-12 weeks or longer to receive items redeemed through point reward systems.

Business Credit Card Rewards

Points can be redeemed for various items inclusive of apparel, business supplies, gift cards, electronics, household items, and even travel. Sometimes point rewards can even be redeemed for cash.

Travel

Travel rewards are my personal favorite, which is why AMEX is at the top of my list. American Express has one of the best travel reward programs available right now – only Chase is conquerable to it in my opinion. Our family literally once paid for all of our travel expenses inclusive of 4 first class airplane tickets, and a 7-day hotel stay and rental car with our travel rewards offered through my AMEX card.

Business Credit Card Rewards

A number of other credit card companies also offer travel business credit cards. Travel reward benefits often include free or reduced cost airplane tickets, hotel stays, car rental fees, and more. These types of cards are for serious travelers as they reward users who pay for airline, hotel, and other types of travel with their card.

Though well worth their value, travel reward programs usually come with steeper annual fees. Most of the top tier travel reward business credit cards boast an annual fee of anywhere between $250-$595. Such programs generally include free annual airline tickets or fee credits, airport lounge access, rental car insurance, and more. This means that you can easily get double or triple the value of your annual fee depending on how you use your card and your reward program.

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