A credit card is a necessary tool for making purchases and borrowing funds for your small business. Promotional offerings for credit lines for small businesses have been expanding as of late, and it has become easier for startups and small businesses to open up accounts. With an abundance of options, it can be overwhelming and you can easily forget what’s most important. From thinking long-term to considering card rewards, here’s what to consider when selecting a small business credit card.
Evaluate Your Spending Habits
The first thing you should consider is your own spending habits. For example, are you planning on carrying a balance and paying your charges off over time, or will you pay them off every month? The annual percentage rate (APR) becomes important if you plan on carrying a balance, so pay attention, because your options vary. If rates are rising in general, a fixed rate is an attractive option. On the other hand, if you have good credit, you may be offered a lower starting rate or even an initial year of credit with 0% APR. If you pay in full each month, look for longer grace periods and more generous rewards. Speaking of rewards, you’ll want to pay attention specifically to what you’re spending your money on. With the prevalence of reward programs, seeking out programs that your company could benefit from, based on your spending frequency or the industry in which you operate, can save you money.
Read the Fine Print
Rather than just focusing on the APR and the potential rewards programs, devote plenty of time to familiarizing yourself with the fine print. There are differences between “professional” cards and personal credit cards, including the fact that professional cards don’t have to meet certain federal consumer credit card protection rules. As a result, banks and card companies have a greater ability to change your rates and fees without giving you notice. This can challenge your cash flow budget, especially if you carry a balance. Additionally, it’s typically better to focus on the cost of a credit card, rather than the many rewards that companies offer. For example, some cash back offers won’t give you even a fraction of a double-digit APR over the course of a year, and aren’t worth the give-and-take. It’s best to remember that, typically after your initial promotions expire, you’ll probably end up being charged any where from 20% to 24.99% APR plus any additional fees.
Liability Acceptance and Contingent Liability
Often times with business credit card offers, personal liability for unpaid credit card bills falls directly to the company officer that signed the application for credit. Also consider that most major banks’ small-business credit card terms and conditions allow said bank to pull funds directly from any personal bank accounts held at that same bank. On top of that, companies can report this contingent liability to credit bureaus. This will affect your personal finances in the future, especially if you have a partner who likes to run up large credit card purchases. Choosing a small business credit card can be difficult, especially with an overwhelming amount of promotional offers. However, with an accurate assessment of your business’ spending, a clear idea of your priorities, and a thorough sweep of the fine and ultra-fine print, you should be able to make the right decision for your small business.
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- 3 Steps to Remove the Uncertainty of Choosing a Small Business Credit Card - December 23, 2013