Almost all major banks and credit card processors have a card tailored specifically for small businesses. Before you jump in and sign up, it pays to first think about the new credit you're taking on.
A business owner can usually get a higher credit limit on a business card than on a consumer card, and typical rewards include business-friendly discounts, like on shipping and office supplies. They also help keep business and personal finances separate.
"Almost any business credit card will fulfill about 80 percent of what you need, but the extra 20 percent is more nuanced depending on how you plan to use it," says Ben Woolsey, director of marketing and consumer research at Austin, Texas-based CreditCards.com, a review and comparison website.
Review sites such as CreditCard.com, CardRatings.com, and Bankrate.com offer online tools to compare interest rates, rewards programs and annual fees. Regardless of which card you chose, there are three questions you must ask yourself before signing up.
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1. Do you really need it? While it's tempting to sign up for a credit card at the first sign of a cash-flow crunch, avoid making a knee-jerk decision, Woolsey says. Most consumers already have four or five credit cards in their wallets but only really use one. If that's you, then consider designating one of your personal credit cards for business purposes only.
Also, remember that credit card processors and banks will use your personal credit history as a reference for the business card. If your business doesn't make it and you have to declare bankruptcy, your personal credit score is going to take a hit.
2. What are you going to use it for? If you plan to make large purchases with the credit card that you can't pay back immediately, your top priority should be to secure a card with the lowest interest rate you can find. But if you're looking mainly for convenience, such as ordering monthly supplies that you plan to pay off each month, then search for the card that offers the best rewards programs.
While you might prefer no annual fee, sometimes the perks make the fee worth it. "Before you pay an annual fee, you should ask yourself: Am I getting something above and beyond that justifies the annual fee?" says Woolsey. For example, one American Express business card -- with an annual fee -- comes with complimentary entry into airport lounges, a popular perk for frequent travelers.
3. How organized is the rest of your financial life? If you aren't on top of all of your bills, you run the risk of having your interest rates raised without advance warning on a business credit card. While the Credit Card Accountability Responsibility and Disclosure Act protects consumers from predatory pricing, business cards are not covered in the law.
"Small business cards are still subject to the whims of the card industry in terms of the pricing policies, fee policies," Woolsey says. A credit card issuer can look at any publicly available source of information about you to determine your risk profile. "If you have been late with your water bill or cable bill, they can jack up your interest rate even if you have been current on the small business account," he warns.
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