As small business lending decreases in the wake of a poor economy, many small business owners are turning to credit cards, both business and personal to finance operations. Picking a credit card for your business parallels the process for personal cards in many ways. But, no matter how you cut it, doing homework beforehand is key. A dedicated business credit card is a tremendous tool for handling many of the costs incurred in operations. That part of the equation is easy. If you have established personal cards, make timely payments, and carry a solid personal credit score, you’ll have little problem securing a business card. Choosing the right card is where that homework comes into the picture.
Know Who You Are, Or At Least Your Business
Credit cards all look pretty much the same on the outside, but judging a book by its cover is cliché at best. There is no such thing as a simple credit card anymore, personal or business. Offers are wide-ranging and far-reaching. The key is knowing what works for your business and how you can maximize the benefits while minimizing the costs. The questions are easy enough. What percentage of the credit given will you be using? Will you carry a large balance? Will you pay that balance off monthly or in installments? Can a zero percent initial interest rate significantly balance out a higher rate later on? And the favorite of people and businesses I speak with: what does the rewards program entail? Figuring out which card is right for your business is a matter of matching the answers to these questions with the offers on the table.
Interest Rates, Fees, and Interest Rates; And Rewards Too
A good small business credit card is a convenient source of short-term credit, but be aware of all costs associated before applying. Interest rate structures vary from card to card. Some will offer interest free use for the first year with a slightly higher rate after that. This can benefit a business looking to make large purchases now. Some cards will carry a standard rate throughout, while others will bring with them an annual fee. Annual fees aren’t all bad. With them, cards often offer additional benefits like increased rewards or longer grace periods to make payments. There is a lot to take in, but a little research, and knowledge of your business, can whisk away any worries here.
And as for those rewards, many people I speak with are seduced by reward programs. Don’t get me wrong here. They have their place, but should represent just one factor in the decision making process. If you travel consistently you may be looking for airline rewards. If that isn’t the case there are cash back offers of anywhere from 1-5%. There are countless other perks out there if you do that homework. Know what you need and what you’ll use. But more importantly, know the fine print. Be aware of exclusions that might prevent you from cashing in on those benefits when you want them. You’ll thank yourself later. Maybe you’ll thank me too.