How to Choose a Business Credit Card

In the midst of the ongoing credit crunch, more small companies are turning to business credit cards to provide the financing they need to manage their cash flow cycles, meet working capital requirements, and buy equipment and supplies.

While tighter lending standards at banks are still making it difficult to get a small business term loan or line of credit, it’s typically easier to obtain a business credit card, because the qualification criteria are usually less stringent. Plus, there are more credit card options for business owners to choose from today than ever before. They come with a wide range of features, benefits, fees, and rewards.

To choose the card with the right mix of features and benefits for your company’s needs, you first have to decide which are most important to you. Here are a few questions to ask yourself as you evaluate different credit card options:

Do I plan to carry a balance or pay off the card each month?

If you plan to pay off your balance every month, then the interest rate on the card won’t be as important to you. But you should still shop for a card with the lowest possible rate, in case you need to carry a balance in the future.

If you do plan to carry a balance on your corporate card, then look for the lowest permanent (not introductory) interest rate you can find. Many corporate cards offer low introductory rates — even zero percent APR — on purchases made in the first six months or so. After the introductory period, rates usually reset to the standard APR, which currently starts at about 13 percent. The interest rate can be raised, however, at the card issuer’s discretion based on changes in your credit rating and payment history, so keep a close eye on your credit and make all your bill payments on time.

How large a credit line do I need?

Remember that a business credit card is essentially the same thing as a business line of credit. The card allows you to “borrow� (i.e., charge) up to a predetermined amount of money, which is based on your company’s credit rating. To obtain the lowest possible interest rate and largest possible credit limit, strive to maintain a strong credit rating by paying all your corporate bills on time.

Do I want to pay an annual fee?

Most business credit cards charge an annual fee, ranging from $59 to as high as $450, although some will waive the fee for the first year. In general, the more rewards and special features and services a card offers, the higher the annual fee. A few fee-free corporate cards are available, but they typically offer less-generous rewards programs and feature higher interest rates.

What type of rewards would be most valuable to my business?

Gone are the days when frequent flier miles were the only reward card issuers had to entice new corporate cardholders. Today, there’s a wide variety of different kinds of rewards programs to choose from.

In addition to frequent flier miles and companion airline tickets, you can now participate in rewards programs that allow you to earn points you can redeem for merchandise, gift cards, hotel stays, and cash back. Most programs offer bonus miles or points on the first purchase you make with the card, as well as on purchases made in certain categories, such as wireless services, gasoline, and office supplies. has a side-by-side comparison of the features and benefits of some of the top business credit cards.

Read the next article in this series: How to Use a Business Credit Card Wisely.

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