A business credit card is an essential tool for modern businesses, and there are several factors to take into consideration for a business credit card. Obtaining loans for major purchases on property requires that a business display responsible credit use, and a business credit card helps build credit history. In addition, credit cards with good benefits may also offer a business the means to make major purchases of equipment or supplies, so obtaining a card with excellent benefits can help the business save money and fund expansion efforts.
Considering the Value of Rewards Cards
Similar to consumer credit cards, business credit cards today often feature rewards like frequent flyer miles, discounts, and cash back. For business owners that expect to use the company credit card regularly, a rewards card is an excellent option because it may help reduce the cost of future purchases. For example, a card that offers frequent flyer miles may reduce the cost of business travel for the company.
According to an article published by American City Business Journals, the best rewards cards today offer rewards of approximately 2% on purchases. However, these rewards may not provide appropriate savings for a company that carries a balance from month-to-month. The interest rate paid on the balance would likely exceed the amount saved by the company in rewards or cash back. Business rewards cards are a solid option, but the overall cost of the card is more important.
Company Cards May Require Multiple Users
A personal credit card will often feature a single user or two users if the applicant has a spouse. A commercial or business credit card, on the other hand, may need to support several users at the business. In some cases, this may mean finding a card that will provide a large credit limit that will accommodate everyone who needs to use the card. In other cases, the company may need to consider applying for multiple cards.
In addition, some business credit cards charge additional fees when extra users are put on the account. For businesses where each employee needs a card with his or her name on it, the fees for certain cards can add up swiftly. In such cases, finding a card that doesn’t charge extra fees for additional users can help keep the overall card cost as low as possible.
Business Credit Rating & Payment History
Over time, a business will cultivate a payment history and credit report just like an individual. Mistakes like late payments and overdue bills can impact a business credit report just as severely as an individual report. When choosing a business credit card, it’s essential to understand that the fees associated with late payments can have a significant impact on a business’s creditworthiness.
According to the Wall Street Journal, some business card companies will eliminate the rewards earned on a card if the account receives any late payments. Poor use of a business card may even result in cessation of various benefits attached to the card such as discounts at various retailers. It’s important that a business owner applies for a card only when he or she is confident the card will be used in a responsible manner.
Using personal credit cards while a business is very small is convenient, but business growth is often tied to the strength of a company’s credit history. Applying for a business credit card is an essential step in the evolution of any business, and the factors to take into consideration for a business credit card will ensure the business enjoys a low cost associated with the credit card.