Credit Cards for Small Businesses: Your Best Options and How to Choose
Running a small business is no small feat. From managing day-to-day operations to planning for future growth, entrepreneurs have their hands full. One crucial aspect of business management that often gets overlooked is choosing the right credit card. A well-selected business credit card can be a powerful financial tool, offering benefits like cash back, travel rewards, and improved cash flow. But with so many options out there, how do you pick the perfect card for your small business? Don’t worry – we’ve got you covered. In this comprehensive guide, we’ll explore the best credit card options for small businesses and walk you through the process of choosing the ideal card for your unique needs. So, grab a cup of coffee, settle in, and let’s dive into the world of small business credit cards!
Why Your Small Business Needs a Credit Card
Before we jump into the nitty-gritty of card options, let’s talk about why your small business should have a dedicated credit card in the first place. You might be thinking, “I already have a personal credit card. Why can’t I just use that for business expenses?” While it’s tempting to mix personal and business finances, having a separate business credit card offers numerous advantages. First and foremost, it helps you maintain a clear separation between personal and business expenses, which is crucial for accurate bookkeeping and tax preparation. Plus, business credit cards often come with higher credit limits and more tailored rewards programs that can benefit your company’s bottom line. They can also help you build your business credit score, which can be invaluable when seeking loans or negotiating with suppliers in the future. So, if you haven’t already, it’s time to consider adding a business credit card to your financial toolkit.
Top Credit Card Options for Small Businesses
Now that we’ve established the importance of having a business credit card, let’s explore some of the best options available in the market. Remember, the “best” card for your business will depend on your specific needs and spending patterns, but these cards are consistently rated highly by small business owners across various industries.
The Cash Back King: Chase Ink Business Cash® Credit Card
If you’re looking to maximize your returns on everyday business expenses, the Chase Ink Business Cash® Credit Card is a solid choice. This card offers impressive cash back rates on common business purchases, with 5% cash back on the first $25,000 spent in combined purchases at office supply stores and on internet, cable, and phone services each account anniversary year. You’ll also earn 2% cash back on the first $25,000 spent in combined purchases at gas stations and restaurants each account anniversary year, and 1% cash back on all other purchases. The best part? There’s no annual fee, making it an excellent option for businesses looking to maximize rewards without additional costs. Plus, new cardholders can often take advantage of a substantial sign-up bonus, giving your business a nice cash infusion right from the start.
The Travel Enthusiast’s Dream: The Business Platinum Card® from American Express
For businesses that involve frequent travel, The Business Platinum Card® from American Express is hard to beat. While it comes with a hefty annual fee, the perks can more than make up for it if you travel often. You’ll enjoy 5X Membership Rewards® points on flights and prepaid hotels booked through amextravel.com, access to the Global Lounge Collection, including Centurion Lounges and Delta Sky Clubs when flying Delta, and a $200 annual airline fee credit. The card also offers a 35% points rebate on eligible flights booked through Amex Travel, which can significantly reduce your travel costs. If your business requires you to be on the road (or in the air) frequently, this card’s benefits can help make your travels more comfortable and cost-effective.
The All-Rounder: Capital One Spark Cash Plus
If you’re after a card that offers straightforward rewards without complicated categories, the Capital One Spark Cash Plus might be your ideal match. This card offers a flat 2% cash back on all purchases, with no limits or restrictions. It’s a charge card, which means you’ll need to pay your balance in full each month, but it also means there’s no preset spending limit. This can be particularly useful for businesses with fluctuating expenses or those that occasionally need to make large purchases. The card does come with an annual fee, but if your business spending is substantial, the unlimited 2% cash back can easily outweigh this cost. Plus, you can earn additional cash bonuses for high annual spend, making it even more rewarding for businesses with significant expenses.
How to Choose the Right Credit Card for Your Small Business
Now that we’ve looked at some top contenders, you might be wondering how to narrow down your options and choose the perfect card for your business. Don’t worry – we’ve got a step-by-step process to help you make an informed decision.
Step 1: Analyze Your Spending Patterns
The first step in choosing the right business credit card is to take a close look at your company’s spending habits. Pull out your financial records and ask yourself some key questions. Where does your business spend the most money? Do you have high travel expenses, or are office supplies your biggest expenditure? Are your expenses fairly consistent month-to-month, or do they fluctuate significantly? Understanding your spending patterns will help you identify which rewards programs will benefit your business the most. For instance, if you spend a lot on office supplies and internet services, a card like the Chase Ink Business Cash® might be ideal. On the other hand, if travel is a big part of your budget, a card with travel rewards and perks like The Business Platinum Card® from American Express could be more beneficial.
Step 2: Consider Your Credit Score
Your credit score plays a crucial role in determining which cards you’re likely to be approved for. Most premium business credit cards require good to excellent credit scores. If your credit score isn’t quite where you’d like it to be, don’t despair. There are still options available, such as secured business credit cards, which can help you build your credit while enjoying some of the benefits of a business card. It’s also worth noting that some card issuers consider your personal credit score when you apply for a business card, especially if your business is new or doesn’t have an established credit history. If you’re unsure about your credit score, it might be worth checking before you start applying for cards.
Step 3: Evaluate Annual Fees
Annual fees can vary widely among business credit cards, from $0 to several hundred dollars. While a high annual fee might seem off-putting at first glance, it’s important to consider the value of the rewards and benefits the card offers. In many cases, if you’re able to maximize the card’s perks, a higher annual fee can be well worth it. For example, if a card offers an annual travel credit that you know you’ll use, factor that into your calculations when considering the annual fee. On the other hand, if you’re just starting out or your business expenses are relatively low, a no-annual-fee card might be more appropriate. The key is to do the math and determine whether the benefits you’ll receive outweigh the cost of the annual fee.
Step 4: Look at Introductory Offers
Many business credit cards come with attractive introductory offers, such as sign-up bonuses or 0% APR periods on purchases or balance transfers. These offers can provide significant value, especially in the short term. A large sign-up bonus can give your business a nice influx of cash or rewards points, while a 0% APR period can help you finance a large purchase or transfer a balance without accruing interest. However, it’s important not to be swayed solely by these introductory offers. Make sure the card also makes sense for your business in the long term, after the introductory period has ended.
Step 5: Assess Additional Perks and Benefits
Beyond the core rewards program, many business credit cards offer additional perks that can provide significant value. These might include travel insurance, purchase protection, extended warranties on items bought with the card, or even access to exclusive events or experiences. Some cards also offer helpful business management tools, such as expense tracking features or the ability to easily add employee cards. Consider which of these additional benefits would be most useful for your business. For instance, if you frequently purchase expensive equipment, a card with robust purchase protection could be particularly valuable.
Making the Most of Your Business Credit Card
Once you’ve chosen the right credit card for your small business, it’s important to use it strategically to maximize its benefits. Here are some tips to help you get the most out of your new financial tool:
Use It for All Eligible Expenses
To maximize your rewards, try to use your business credit card for all eligible expenses. This not only helps you earn more cash back or points but also simplifies your bookkeeping by consolidating most of your expenses in one place. Just be sure to keep your personal and business expenses separate – mixing the two can create headaches come tax time and may even put your personal assets at risk in some situations.
Pay Your Balance in Full Each Month
While business credit cards can be a great tool for managing cash flow, it’s best to pay your balance in full each month if possible. This helps you avoid interest charges, which can quickly eat into any rewards you’ve earned. If you do need to carry a balance occasionally, try to pay it off as quickly as possible to minimize interest costs.
Take Advantage of Category Bonuses
If your card offers bonus rewards in certain spending categories, make sure you’re maximizing these opportunities. For example, if your card offers extra points on office supply purchases, consider buying gift cards for other retailers at office supply stores to earn the bonus points on a wider range of purchases. Just be sure to check the terms and conditions of your card to ensure this is allowed.
Utilize Employee Cards
Many business credit cards allow you to add employee cards to your account at no additional cost. This can be a great way to streamline expense management and earn rewards on your employees’ business spending. Just be sure to set clear guidelines for card usage and regularly review employee spending to prevent misuse.
Stay on Top of Rewards and Benefits
Credit card rewards and benefits can change over time, so it’s important to stay informed about what your card offers. Regularly review your card’s terms and conditions, and don’t be afraid to call your card issuer if you have questions about how to maximize your benefits. Some cards even offer concierge services that can help you make the most of your card’s perks.
The Impact of Business Credit Cards on Your Credit Score
It’s important to understand how using a business credit card can affect both your business and personal credit scores. While business credit cards are primarily designed to help you build business credit, some card issuers report activity to personal credit bureaus as well. This means that responsible use of your business credit card could potentially boost your personal credit score, while missed payments or high balances could have a negative impact. On the flip side, some business credit cards only report to business credit bureaus, which can be beneficial if you’re trying to build business credit without affecting your personal credit. When choosing a card, consider asking the issuer about their reporting policies if this is a concern for you.
The Future of Business Credit Cards
As we look to the future, it’s clear that business credit cards will continue to evolve to meet the changing needs of small business owners. We’re already seeing trends towards more personalized rewards programs, increased integration with business accounting software, and enhanced security features to protect against fraud. Some card issuers are also experimenting with dynamic credit limits that adjust based on your business’s cash flow and spending patterns. As technology continues to advance, we can expect to see even more innovative features designed to help small businesses manage their finances more effectively.
Making Your Final Decision
Choosing the right credit card for your small business is an important decision that can have a significant impact on your company’s financial health. By carefully considering your spending patterns, evaluating the rewards and benefits offered by different cards, and thinking about your long-term business goals, you can select a card that not only meets your current needs but also supports your future growth. Remember, there’s no one-size-fits-all solution when it comes to business credit cards. What works best for one company might not be ideal for another. Take your time, do your research, and don’t be afraid to reach out to card issuers with questions. With the right approach, you can find a business credit card that becomes a valuable asset in your financial toolkit, helping you manage expenses, earn rewards, and ultimately grow your business.
Disclaimer: The information provided in this blog post is for general informational purposes only and should not be considered financial advice. Credit card terms, conditions, and offerings can change over time. Always read the terms and conditions carefully before applying for any credit card. We strive for accuracy but cannot guarantee that all information is current. Please report any inaccuracies so we can correct them promptly.