Choosing a Credit Card for Your Business

7/10/2007

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If expense reports are piling up and you’re tired of hearing your employees complain about not getting reimbursements, it might be time to consider a business credit card. The Better Business Bureau (BBB) offers time-tested, trustworthy advice to business owners on choosing the right credit card for your business.

Banking and credit card industry studies and reports note that small businesses in the U.S. spend nearly $5 trillion annually on products and services. However, studies also report that only about six percent of all small business operational transactions involve the use of credit cards.

It is easy to understand why small business credit cards represent a growing, competitive marketplace, and many banks and credit card companies are actively pursuing small business owners as a rich source of new partners and clients.

For small business owners, now is actually a good time to research how a business credit card can benefit operations, or to re-evaluate existing business credit card plans to take advantage of best rates and current offers in the marketplace.

There are many ways a business credit card can make life easier for owners and employees. Cards can build a credit history for a company, provide short-term loans, offer discounts with vendors, and make expense reports a thing of the past. In addition, owners have the convenience of one bill, which will help in tracking business expenses and employee spending, making it easier to budget for the future.

Basically, there are two options for business credit cards - small business and corporate credit cards. The decision on which option to choose is based in large part on the size of the business and who is responsible for the debt.

As the names imply, a corporate credit card is for large businesses and corporations and the burden of debt typically falls on the corporation. A business credit card is intended for smaller businesses with sole-proprietors and the burden of debt is on the owner. Unless the business is producing more than $2 million annually in gross income, a corporate credit card isn’t an option.

A business credit card is very similar to a personal credit card and carries a credit limit and minimum monthly payments. Business owners and any employee who will use the card will typically undergo a credit check.

The BBB offers tips for choosing and implementing a new business credit card approach:

  • Do your research. Many banks and credit card companies are making various offers with attractive perks that may fit nicely with your business needs. But offers run the gamut, so be choosy. You’ll want to find out about offers from both your local banks and national credit card companies.

  • Don’t get burned by special offers. As noted, there are many offers and plans available for small business owners, but pay specific attention to business credit card plans with introductory offers for 0% APR. While this may be a good option for an immediate high-end purchase to support your business, you need to find out what the conditions for the APR are – under what conditions will it rise, and what are your options if it does rise. Beware of getting stuck with a high APR after the introductory period.

  • Consider the rewards. Many cards will offer perks for both you and your employees, including discounts with preferred vendors and airlines as well as rewards points.

  • Lay the ground rules. Make sure your employees know exactly what can and cannot be charged on the credit card. Some cards will let you adjust the credit limit on individual employee cards, as well as limit where the cards can be used.

For additional tips on managing your business’s finances, go to www.bbb.org.

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