What to Look for When Choosing a Business Credit Card: 4 Important Features

What to Look for When Choosing a Business Credit Card: 4 Important Features

Credit cards aren’t the devil. They’re tools. An invaluable resource that many entrepreneurs use to help bootstrap their startups. They can also be used to help get a company through tough times. Choosing the right business credit card is more than a financial decision—it's an investment in your company's future.

The right business credit card should help you efficiently manage cash flow, track expenses, and even earn rewards. Selecting a card that aligns with your business's financial needs and goals can be challenging with many available options. Here are four essential features to consider when weighing your choices.

1. Understanding Rates and Associated Costs of Credit Cards

The Annual Percentage Rate, commonly known as APR, is a financial element that influences the total cost of carrying a credit card balance.

When selecting a credit card, comparing the APRs offered by different issuers is imperative. Be mindful to identify whether the APR is fixed, meaning it stays constant over time, or variable, indicating it can fluctuate based on an index such as the prime rate.

A clear understanding of the APR structure will help manage finance charges should you choose not to pay the full monthly balance.

Annual Fees

Annual fees vary between card offerings and can impact the overall value you derive from the card. Some luxury credit cards with high-end benefits charge substantial annual fees, which can be justified if the perks, such as travel credits and bonus points, surpass the cost.

Conversely, if the annual perks are not utilized to their fullest potential, opt for a card with no annual fee. Why pay for something you don’t need? With a bit of research, you can find the perfect no-annual-fee business credit card that gives you everything you want.

Late Payment Fees

This is a big one. Those late fees can be a doozy. You need to be aware of all possible charges associated with a credit card. These fees can be high and may also affect your APRs. It can quickly make your credit card debt difficult to manage.

Pay attention to payment deadlines. Stay informed on all of the terms outlining fees, and try to create a calendar with all of your due dates so you never miss a payment. You can also set up auto-pay to avoid late fees. Proactively managing card payments can save money and benefit your credit history.

2. Comprehensive Rewards Program

The first thing you want to do is thoroughly evaluate which rewards category aligns most harmoniously with your company's operational model. Credit cards traditionally provide a selection of benefits, including cashback opportunities, an accumulation of points, or the earning of miles.

Each type has distinct advantages. What does your business want and need? How do these rewards help you grow, and how do they impact your bottom line?

For example, your business might benefit more from cash rebates on purchases than preferential discounts on business-related travel expenses.

Check Out the Redemption Options

Read up on the redemption options. Do your own research. Read reviews and talk to colleagues.

The program’s flexibility can be a determining factor in its utility. Are the accrued points redeemable at any time? Or are there constraints tied to specific periods or exclusive partnerships with specific merchants?

Perks and Benefits

Many cards offer an expansive suite of additional conveniences and protections beyond the standard fare. They’re great. But they are not free.

Perks can range from exclusive access to airport VIP lounges. They provide a convenient and relaxing atmosphere for busy travelers. Some cards offer nice comprehensive travel insurance as well.

The real question is: Do you actually need these perks? And how much will they cost you in annual fees and APR? What makes them right for your business?

3. Credit Limit

Determining your business’s credit limit is largely based on a thorough assessment of your creditworthiness. Credit card companies look at several factors here.

They’ll likely look at your company’s annual revenue, repayment history, existing debts, and overall financial health. Additionally, the length of your credit history and the number of credit lines your business currently manages will be considered.

Flexibility in Credit Limit Adjustments

Entrepreneurs and startups need the ability to adjust their credit limits. So, if you fall into this category, look for a credit card that offers to help you with your business's financial flexibility.

As your business expands and your financial needs escalate, access to a higher credit limit could be necessary to capitalize on growth opportunities. It’s really important to speak to the issuer to determine how they handle this.

It’s something you’ll have to investigate on your own. Most credit card issuers aren’t going to advertise their willingness (or lack thereof) to move your limit.

If a company offers a card, but you have no chance of getting extra credit when you need it, then it’s probably not the right card for you.

4. Attractive Introductory Offers

Nothing makes a business owner happy like free money. Many credit cards entice new customers by providing attractive sign-up bonuses. Bonuses can be a large amount of reward points, airline miles, or even cashback.

To qualify for these bonuses, you’ll probably be required to spend a specified amount on your card within a certain time frame after opening the account. Most companies have a 90 to 180-day window to hit that target.

Introductory 0% APR Periods

Some credit cards may also offer an introductory period with 0% Annual Percentage Rate (APR) on new purchases, balance transfers, or both.

This period can sometimes last from six months to over a year. The feature is particularly valuable for those who are looking to make large purchases that they plan to pay off gradually over time and don’t want to incur interest.

Business owners aiming to transfer balances from other high-interest credit cards and pay down their debt more efficiently while avoiding extra interest charges can also benefit.

Your Business is Unique - Don’t Settle for a Card That Doesn’t Complement Its Needs

Selecting the right business credit card is a multifaceted decision. Your approach needs to be diligent and requires a deep understanding of what your company needs.

From the pitfalls of APR and the potential drain of annual fees to the bountiful opportunities presented by rewards programs, each card offers a distinct blend of benefits and drawbacks.

Managing your credit effectively by staying ahead of payment deadlines. The right credit card is an invaluable tool in your business's financial arsenal.

Your business is as unique as your financial choices. Invest time in finding a credit card that not only meets but boosts your company's financial health and growth.

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