How to Choose the Right Business Credit Card

Startup Business Employees Working At The Office
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Having a business credit card can simplify your life by keeping your personal and business spending separate. You may even get rewards on your business purchases, a break on paying interest, or perks that are bound to make your employees happier. Here are some things you should consider when choosing a business credit card.

When you apply for a credit card to use for your business, don’t be surprised if the application requests your personal credit information, particularly if you’re a sole proprietor. If you’re approved, the credit card issuer may hold you personally liable for any purchases your business can’t afford to repay. 

Your Payment Habits

If you need to invest a lot in your business quickly, or already have high-interest rate credit card debt, consider a business credit card with an introductory promotional APR on either purchases, balance transfers, or both. These offers give you some time—often up to a year—to pay off larger business purchases like equipment, office furniture, or new technology, without accruing interest charges.

You may be able to snag a card that doesn’t have a balance transfer fee, but if you can’t, make sure you’ll save more in interest than you’ll pay for the transfer. (Balance transfers are usually 3%-5% of the transaction amount.)

If you tend to carry a balance, make sure the ongoing APR is as low as possible. Note that there may be different APRs for balance transfers and cash advances. The card might even have a much higher penalty APR when you miss a payment or exceed your credit limit.

A charge card is a worthwhile option if you have a big operating budget and don’t need to run a balance from month to month. These often come without a preset spending limit; the limit is determined by your own spending habits, income, and creditworthiness. Just make sure to charge only what you can afford to pay.

Rewards

Many business credit cards pay you cash back or other rewards on your purchases, sometimes at tiered rates depending on the spending category. Maybe you and your employees are on the road a lot and should have a card that awards miles or points for travel. Or perhaps you spend a lot on shipping or office supplies.

If you’re not sure how your budget is shaking out, review your past few months of bank statements. New businesses without a spending history can opt for a flat-rate rewards credit card to start.

Check how rewards are redeemed too, and make sure you can actually use the ones that are most valuable. Some cards offer a statement credit or deposit to your business checking or savings account, but others focus on direct redemption with an airline or hotel.

If your business doesn't require much travel, free nights and flights won't benefit you much. And redeeming miles or points for gift cards or online merchandise can reduce their value.

If you and your employees typically travel to the same places, consider the airline hubs and hotel properties you’re most likely to use. A co-branded airline or hotel credit card that rewards you with free flights and hotel stays may be the most lucrative.  

Sign-Up Bonus

Rewards credit cards usually have a signup bonus that you can earn for spending a minimum amount in the first few months of having the card. These can give you a big boost right off the bat, but should be weighed against any annual fee the card charges. 

International Use

If you’re planning to use the card to make purchases from vendors in other countries or to pay for international travel, a card with no foreign transaction fee is important.

This fee can be 2% to 3% of the purchase amount, so any rewards earned on the purchase would likely be canceled out. Luckily, there are plenty of business cards that don’t charge for foreign transactions, so if you’re hoping to grow your business abroad, plan accordingly.

Fees vs. Perks 

Paying attention to credit card fees is important for minimizing business expenses. Check the fee schedule before applying for a card. While a balance transfer fee or cash advance fee won’t apply unless you make those transactions, some fees may be unavoidable.

If the card charges an annual fee, make sure you’re more than recouping your cost with the rewards and/or perks you’re receiving. Perks may include cell phone insurance, car rental insurance, free airport lounge access, waived baggage fees, seat upgrades, and more. Sometimes, the extra perks can be the tiebreaker between two similar credit cards.  

Employee Cards

Adding employee cards allows you to extend purchasing power to your workers and earn additional rewards for your business. This can be extra useful if there are reward bonuses for meeting a certain spending threshold in a year.

On the flip side, consider whether a card that charges an additional fee for employee cards offers enough value to justify the extra cost.

Pay attention to spending and account management tools too. Some cards (some from American Express, for instance,) allow you to set a separate spending limit for each employee card. Many cards also let you download transaction history to financial software like Quicken and Quickbooks, making accounting easier. 

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