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How to Tell Which Credit Cards Are Best for Your Business Needs

Business credit cards are more than a luxury, they are a necessity. With so much variety on the market, it’s often a little disconcerting choosing between them. There are many benefits and drawbacks to credit cards, but careful selection can mitigate the negatives and provide you with a service that is largely beneficial to your business. Establishing a business line of credit can be an arduous undertaking for a newly formed company.

Credit cards typically feature as the easiest way of borrowing money from a lender. Besides, an estimated 9 million US businesses accept credit cards as payments options, and this number is growing all the time. In terms of their utility value in a business operation, credit cards offer many unique benefits to their owners. A caveat is in order however: careful financial management is essential with credit cards. Overspending comes with high costs in the form of late charges, and interest-related fees.

What factors should you consider when using credit cards for your business?

If possible, it is always best to go with a credit card that offers 0% APR. Small businesses benefit immeasurably from these cards. 0% APR also means that it is possible to purchase equipment, vehicles and machinery – interest-free – for a period of time. Of course, credit cards with $0 annual fees are preferred to cards that charge hundreds of dollars to keep the accounts active. It is preferable to pick a credit card with cashback rewards of between 1% and 3%, 0% APR, and $0 in annual fees.

Businesses that rely on partners and employees traveling domestically or internationally will benefit from credit cards with frequent flyer miles, premium travel perks and no foreign transactions fees. Some business credit cards offer uncapped expenditure to their clients, particularly American Express cards. Companies can also manage the spending limits on company credit cards by allocating a fixed budget to each employee vis-à-vis the company credit card.

What fees are typically involved with credit cards?

The obvious fees are the interest-related charges on outstanding balances. These will vary from one provider to the next, but they typically increase if the country’s interest rate increases, and decrease if the country’s interest rate decreases. From the moment your company applies for a line of credit, you may start incurring fees, depending on the individual credit card in question. It is best to opt for a credit card that does not levy an application fee.

In terms of annual fees, these can range from $25-$300, depending on the card in question and the benefits you receive. Sometimes, businesses find it useful to pay the higher annual fees to receive the many perks associated with those cards. For example, higher cashback percentages, birthday bonuses, discounts, exclusive offers and the like typically make up for the high annual fees that are paid.

Making and receiving instant payments worldwide

Besides late repayment penalties, over the limit fees, and balance transfer fees, there are also cash advance fees to take into consideration. It is best not to use credit cards to withdraw cash since users can pay set fees and a percentage of the cash amount that is withdrawn. If you are required to withdraw $500 from your credit card, with a 4% cash advance fee, that amounts to $20 on top of the fixed fee which may be $5. In total, this decreases your available balance by $525.

While costs and fees are important considerations for credit cards, there are many benefits too. These include 100% protection against theft, fraud or hacking, maximum traction from rewards programs, and an internationally accepted payment method – irrespective of the country or currency. Businesses are already set up to accept credit cards from customers, suppliers, and fellow businesses – it simply makes sense to manage this financial resource as effectively as possible.

 

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