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Credit Card Options: How to Choose a Business Credit Card

Hands holding credit card and using laptop. Online shopping

What if one wrong choice completely sabotaged your business?

A business credit card is one of the best ways to expand your business as well as take care of day-to-day needs. Unfortunately, many business owners end up choosing the wrong card.

Wondering how to choose the right card and how this can help your business? Keep reading to discover the answers!

Do Your Homework

Step one of choosing a business credit card is really simple. You need to do your homework regarding exactly what these cards are like!

For instance, you must understand that you can only use these cards for business expenses and never for personal expenses. And you’ll want to explore how easy it will be to issue individual cards to individual employees.

You must also understand the specific drawbacks of these cards. For example, you won’t have many of the protections that a standard consumer has, and you may be personally liable for any debt left unpaid on a business credit card.

On the bright side, you will soon discover how much more a business can borrow than individuals can. That can be helpful in expanding your business almost right away.

Know Your Habits

Once you know about business credit cards in general, it’s time to pick a specific card. And the first step in doing so is to understand the spending habits of you and your business.

For example, do you intend to pay the card off at the end of each month? If so, you may want to focus on cards with specific perks (more on this in a minute).

Alternately, do you plan to borrow a large amount and pay it off over a longer period of time? If that’s the case, you’ll primarily want to focus on the interest rate of the card.

Only by honestly assessing your buying needs and habits can you find a business credit card that is best for you.

Pick Your Perks

In some ways, business credit cards are very similar to personal credit cards. And one of those ways is that many cards come with some very interesting perks.

Some of the perks help you manage your actual business. For instance, some companies may allow you to issue additional cards to your employees at no extra cost.

Some of the perks help you expand your business. These include special financing options as well as spending management tools.

Still, other perks may help you when it comes to business travel. This includes cards that offer special airline fee credits.

As with the spending habits, choosing the right perks comes down to understanding how you intend to use credit with this new card.

The Interest Game

One of the other ways that business credit cards are like personal credit cards is less fun. What are we talking about? Interest, of course!

If you are doing a short-term expansion, you may want to look into cards that have special introductory offers. These are the kinds of cards that offer things like no interest for the first 12 months.

The main thing to pay attention to is the standard interest rate. This is what you’ll have to worry about after any introductory periods end. And that “standard” rate can fluctuate by 10-15%, so make sure to explore your options.

Finally, be aware of any penalty rates. If you end up missing a payment or two, such rates may drive your rates through the roof. This defeats the whole purpose of using credit in the first place.

To Fee or Not to Fee

Certain business credit cards may boast that they have no annual fee. However, some of the best business credit cards do charge a fee.

Wondering why you would ever choose a card with a fee? It all comes down to something we call “perks math.”

The fee is a fixed amount. That means you know exactly how much you must pay each year.

Perks comprise your variable amount. Basically, you’ll want to estimate how much money you effectively gain or save by using these perks.

If the variable amount is greater than the fee, the fee is worth paying. Otherwise, you need to find better perks or a card with a lower annual fee!

The Business Life

Earlier, we talked about the importance of understanding your business expenditures. However, it is equally important to understand your business lifestyle.

Those cards that offer perks for flights and hotels? Those perks are basically meaningless if nobody in your business regularly travels.

Conversely, if you travel a lot in your regional area, things like gasoline perks may be more beneficial than they first seem. It all comes down to your business lifestyle.

It’s important to understand how that lifestyle may change, though. Chances are you got a business credit card to expand your business. Such an expansion could definitely change the way you do business!

Once you understand your business life, you’ll be able to make the best business credit card choice.

Business Beware

We mentioned it before, but this bears repeating: you really need to check the fine print of what happens if you miss any payments.

Sometimes, there is a simple financial penalty. Other times, your interest may be permanently affected.

In some cases, failing to meet a payment may cancel your progress towards certain rewards. This effectively negates some (or maybe even all) of the perks that you may have chosen this card for.

Don’t fall into the trap of thinking you could never possibly miss a payment. Instead, arm yourself with the knowledge of the worst that could happen. Then you can focus on making sure it does not!

Choosing a Business Credit Card: The Bottom Line

Now, you know more about choosing a business credit card. But do you know who can offer you one of the most flexible and competitive cards?

At Signature Bank, we specialize in helping individuals and business achieve their wildest dreams. To see how we can elevate your business, reach out and contact us today!

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