Having a separate credit card for your business expenditures comes with numerous advantages. It allows you to keep track of the operating cost of your business, independent of your personal expenses. This also enables you to gauge company’s budget.

In addition to that, at tax time, having a record of your business expenses makes filing taxes easier. It also allows you to build a good credit history for your small business. Apart from that, there are various other perks of being a business credit card holder.

The rewards of having a business credit card might seem enticing, but the key to reaping those rewards lies in choosing the right business credit card. Listed below are few tips for choosing the right business credit card.

Understand the Types of Business Credit Cards

Banks and credit card issuers offer a plethora of cards for personal as well as business use. While looking for a business credit card, you will come across a range of options that might fit your needs. As such, it becomes really overwhelming to pick the right one. In order to narrow your search, you must first understand the difference between a charge card and a standard business credit card. It is as follows:

Charge Cards: Charge cards are those credit cards that require full payment on the completion of every billing cycle. These cards offer the same features as a standard business credit card, except with strict payment requirements. So, if you are confident that you will be able to come up with monthly payments of the cards without getting late, then charge card can be a good option.

Standard business credit cards: Since the revenues and costs of running a business are fairly unpredictable, a business credit card is a better option for some small-business owners. Monthly payments are sometimes too much of a commitment, especially for start-ups in evolving stages of business.

Check Your Personal Credit Score

It’s important to check the credit score before applying for a business credit card. Applying for a credit card without examining your credit score will only invite a hard enquiry on your credit report. In order to complete the procedure of applying for a business credit card, two credit scores are required. One is the business’s credit score, and the other is the owner’s credit score.

Most credit card companies ask for the owner’s social security number to open a business credit card account. This varies by issuer and account type, which makes personal credit score important in the process of applying for a business credit card. Once you have examined credit scores, you can apply for a card.

Examine the Needs of Your Business

Every business has different needs. Therefore, a one-size-fits-all formula cannot be applied while you are trying to get a business credit card. Examine your business’s needs by looking at where your company spends most.

You need to ask yourself if your business requires you or your employees to travel a lot. You also need to consider if your business needs you to frequently entertain your clients at restaurants and bars, or if your business expenses are mostly restricted to telecom and office supplies.

Depending on the answers, you might want to consider the business credit cards with the best reward point programs and choose the one that suits your business lifestyle the best. These reward points can be redeemed and will help you save some money off of your business expenses.

Consider the Business’s Operating Costs

The operating cost of a business also varies as per the size and type of the business. For example, some businesses totally depend on internet, while others do field work. Examine your business expenditures over the last six months and identifying the two or three biggest operating costs that your business incurs. This will allow you to choose the type of reward program best suited for your business’s needs.

If your company does a lot of travel, consider going for an airline-mile reward. If travel is not a major consideration, go for a card that offers cash-back options.

Look into the Perks

Reward points aren’t the only perks of getting a business credit card. Some small-business credit cards also offer reports on your expenditures that might vary in detail and frequency. This not only allows you to gauge the business’s spending but also makes it easier to keep spending records.

The option to customize the reports you receive could be a major advantage for your business. Therefore, you might want to opt for a credit card that gives you online access to reports and an option to download them directly into your accounting program.

Compare Costs and Savings

It’s always good to compare the overall cost of getting a business credit card, since you don’t want the expenses to exceed the savings of getting a credit card. Sometimes, annual or other fees can affect the savings your credit card is supposed to offer.

You need to make sure that these fees do not cancel out the rewards your card provides. On the other hand, it is also not wise to totally rule out a card that charges an annual fee. Do the math and consider the annual spending of your business against the rewards offered and fees of your credit card. This will help you make a better decision.

Final Word

It’s always wise to review your options before you apply. You must know the basics of business credit cards and must fully understand your requirements. If you search the best business credit cards and study the pros and cons of each credit card against your requirements, you will be able to make a more educated decision.

Author: Shane Paarman