Being a small business owner, dealing with the finances can be daunting, but, in such a scenario, selecting the appropriate business credit card can help ease matters quite a bit. Given the numerous business credit cards that are available, it is pertinent to get one that suits the needs of the business, be it in building business credit, managing expenses or obtaining credit card rewards.
This post will assist you in identifying the right business credit card for you, how to know what the best features are, and how to ensure that the business credit card you choose works for your business. As a result, one will know all the details for choosing the best business credit card that is suitable for them.
What Should You Look for in a Business Credit Card?
When selecting the most suitable business credit card to use for your company, a number of aspects should be taken into account. Different companies have different requirements. It is imperative to select one that satisfies the specific needs of that company.
Key Factors to Consider
1- Credit Limit
The credit card that any business applies for should meet the minimum threshold set by the business whether they are buying travel tickets, office equipment or paying employees. The higher the credit limit, the better. This gives a business more leeway in terms of cash flow.
2- Annual Fee
Some business credit cards come with an annual fee, which could range from £0 to hundreds of pounds. It should make economic sense to subscribe to that card for your business. Try to find cards that provide statement credit or rewards which help offset the fee.
3- Interest Rates (APR)
Check the interest rates which are attached to the card. If you are likely to carry a balance from one month to the next, a low APR is beneficial because it helps cut costs. If you are a new business owner, look for cards that offer 0% promotional APR on purchases or balance transfers.
4- Rewards and Cash Back
Rewards programmes are another feature many business credit cards come with. For instance, credit cards such as the American Express® Business Gold Card allow you to get rewarded for categories that your business spends a lot on. The rewards of a credit card can help cover costs for fuel, business trips, etc.
Understanding Your Business Spending Needs
The spending behaviour of each business is different. To figure out which credit card suits your business best, you will have to analyse the types of expenses your business incurs.
Categories to Focus On
Categories Where Your Business Spends
Is your company into a lot of fuel, restaurants or software subscriptions? For instance, there is the Ink Business Credit Card which focuses on rewarding businesses that spend on advertising or travel-related services.
Personal and Business Expenses
If both personal and business transactions are recorded on a given card, then you would want to use one which enables you to manage and separate the two. That makes tax time easier for you.
Employee Spending:
If your business has employees, you may opt to apply for a business credit card with employee cards. Several business credit cards allow clients to get other cards for workers and record their transactions separately. This enables you to manage the team’s expenses as well as their personal expenses.
What Are the Benefits of Using a Business Credit Card?
There are dangers and downsides of using a business credit card, and these dangers can be avoided by traditional payment methods. It turns out, there is a greater risk in running a business than most would think.
Building Your Business Credit
Starting off, I believe it is important to understand that operating a business credit card properly is the initial step of your business credit history. This will help you in getting desirable terms for your business’s loan and credit card in the near future.
- In simple terms, the more business credit you establish, the better the chances are to qualify for the credit cards or loans with higher limits.
- Moreover, please remember that credit card providers are keen on sending their activities to credit bureaus which makes timely payments affect credit portfolios positively.
Separation of Personal and Business Expenses
Ultimately, having a business makes it easy to distinguish personal expenses from business expenses as long as there is a business credit card. This in turn makes it easy to analyse expenditure, budget, as well as compute tax at the end of the financial year.
How to Choose the Right Business Credit Card for Your Small Business
Selecting the most suitable credit card for your business requires thorough analysis of the distinct needs that your business presents. Let’s go through the process which can guide one to selecting the best card.
Step 1: Assess Your Business Type and Spending Patterns
The business model should go hand in hand with a particular credit card. As a start-up or sole proprietor, you may want to consider a credit card that has low interest rates or one that does not have annual fees. For established businesses, a higher credit limit credit card with better returns may be more useful.
Take a look at the areas in which your business consumes the most resources, be it office supplies, travel, advertising, etc. Then, find a card that pays off or gives cashback in those specific areas.
Step 2: Compare the Best Business Credit Cards Available
Consider the very basic comparison of the market, once clarified by assessing the needs of your business. Some frequently used cards are, for example, the Ink Business Preferred®
- Ink Business Preferred® Credit Card: Suitable for businesses with high advertisement and travel expenses.
- American Express® Business Gold Card: Can be used by varying companies since it offers flexible rewards categories as well.
- Blue Business Plus Credit Card: This suits people or businesses who do not want to pay high annual fees and/or want simple rewards in return.
Step 3: Choose a Card with Employee Benefits
Apart from this, individuals should also consider employee cards if they have employees. You can open additional cards for your employees with the majority of the business credit cards so that all their purchases can be monitored without hassle. That can help boost effective expense management.
Personal vs. Business Credit Cards: Which One Should You Choose?
It is understandable that as the owner of a small business, one would consider using a personal credit card to purchase goods for the business. However, this has its disadvantages.
Key Differences Between Personal and Business Credit Cards
1- Credit Limit
Personal Credit Cards
A personal credit card is usually determined by one’s financial position i.e. their income, credit score and other loans. This would therefore mean that the limit would be much lower than that of a business card. However, if you are operating a developing business, this low limit could grow to be an issue very fast.
For instance, if you are planning on larger advertising campaigns or needing to travel and get office equipment on a personal card that has a small credit limit, then you would reach that credit limit or end up going over the credit limit and being charged penalties.
Business Credit Cards
In most cases, business credit cards are likely to have higher credit limits. This can be attributed to the fact that these cards are meant to support the larger expectations when it comes to purchasing things like stock, promoting the business and other running costs. For example, if you own a café and need to purchase various bulk food stock regularly, you don’t want to have a low limit that you reach quickly and have to keep checking on how far you can go.
Example
For instance, if you are starting out in business and want to recruit employees or purchase stock, higher credit limits make larger purchases more achievable with fewer restrictions. This is especially ideal when you have to buy inventory or hire new personnel and don’t want to use multiple credit cards or be limited to petty expenditures.
2- Rewards and Perks
Personal Credit Cards
The general category of reward points issued for credit card purchases is straightforward for most personal credit cards, for instance, points for particular purchases such as restaurants and petrol, or for an overall cash back. In other cases, the rewards structure is simple and business cardholders may not earn significant cash back on business-use card expenses that do not fall within these categories.
Business Credit Cards
On the contrary, some business credit cards offer more reward points but with more restrictions. These programmes are custom made for business usage and not only would you be earning cash back for the surpassing of your gross sales, but also for travelling, buying office supplies, advertising or subscribing to monthly software services. These rewards are better than those in personal cards, therefore helping in reducing business expenses.
Example
Assume you often travel for work. Then when using a travel card like the American Express® Business Gold Card, it can provide reward points which may include airline miles or a hotel stay. Later these points can be used to get some discounts on the next trip that may help the company make some profit in the future. If you used a personal card, you may lose these specialised rewards which have been made especially with business aspects in view.
3- Building Business Credit
Personal Credit Cards
Using a personal credit card for your company’s expenses will negatively impact your personal credit score as everything including payments, purchases, and use of credit will be reported. This is quite troublesome since your business and personal accounts start to overlap. If you fail to make payments or have a high balance, it may damage your personal credit history and reduce your chances of securing new loans in the future.
Business Credit Cards
The business credit card is designed to help one build business credit. If you run a company and have a business credit card which is paid in due course, use it to establish a professional history for the company. This will aid in acquiring larger business mortgages or financing in the future. It is more efficient, as it provides a clear record of your business’s credit transactions rather than linking it to your personal one.
Example
Consider that you are applying for a loan to grow your business. If you already have a business credit card and a solid business credit score, it will be quite easy to convince lenders that your business manages finances well and might secure flexible terms on the loan. However, it may be more difficult for you to prove that your business is worth loaning to based on a personal credit card as this will likely result in higher interest rates or even denial of the loan.
When Should You Use a Personal Credit Card?
There are instances when a credit card is appropriate, for example if you are starting out and do not have the credit history required to obtain a business credit card. But as your business begins to grow, you will need to transition to a business card in order to maximise the usage of the card while also keeping personal and business expenses separate.
How to Apply for a Business Credit Card
After finding the best business credit card that meets your needs, the next step is to go ahead and apply for it. Below is an outline of how the application process works to ensure it is straightforward and without trouble:
Prepare Your Financial Documents
Documents can include a business’s tax returns, credit reports, and proof of income. Since these documents will be needed in the process, ensure that they are available when applying for a business loan.
Understand the Credit Score Requirements
Credit history can be both personal and business when seeking approval for a business credit card potentially issued by an issuer. However, in most scenarios, clients applying for business credit cards are generally found to have a credit score of 650 or higher.
Review the Terms
It is crucial to read the terms of a credit card prior to signing up. Consider the APR, annual fees, and any other charges involved. Consider whether the card meets the needs or goals that best fit your business.
My Opinion
Having a business credit card that works for your business is extremely important as it benefits your company in many ways. Your selection of the card should reflect your objectives, whether it be to earn rewards, focus on expenses, or to build up business credit.
By analysing and utilising buying patterns, understanding the types of purchases and credit cards, as well as actively employing staff, you are prepared to choose a card that makes your life easier and your business better.
You must keep in mind that not every solution works for everyone. The correct card or credit provider that will serve you well will depend on your specific requirements. So examine your options carefully and discover the best small business credit cards available for your business.
