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How to choose a business credit card

minute read

    Highlights

    • Familiarize yourself with relevant features, benefits and rewards of business credit cards before making a choice.
    • Understand your business’s biggest spending categories — you may be able to earn rewards for every eligible dollar you spend on your business using the card. 
    • Review factors such as credit limits, interest rates and fees to determine if a card aligns with the financial goals of your business.

    A business credit card can be a helpful tool to manage your business expenses, leverage the available credit to make strategic purchases and also to build your business’s credit score. Choosing the right card for your business requires a thoughtful understanding of your needs, spending patterns and financial goals. In this article, we’ll explore some of the key considerations that can help you make an informed decision about which credit cards might work best. 

    1. Get familiar with the main aspects of business credit cards

    When deciding which business credit card to apply for, it may be helpful to understand key features that could affect the way you use and maximize the benefits of having the card.

    • Business credit cards vs. personal credit cards: These two types of cards have several differentiating factors. While personal credit cards are designed for an individual to use on things like groceries and household items, business credit cards cater to the specific needs of running a company. This includes features such as higher credit limits, employee credit cards and expense management tools.
    • Credit limits: Business credit cards typically have higher credit limits than personal credit cards because they take into account both business revenue, personal income and your current credit score. If your business revenue is higher than your personal income, you'd most likely get a higher credit limit than you would on a personal card.
    • Interest rates: In general, rates and fees are similar across personal and business cards but vary by credit card product. It's important to remember that your interest rate for both types of cards is based on creditworthiness.
    • Rewards categories: Business cards may offer rewards in a variety of categories, many of which are targeted toward business needs like office supplies or phone and internet services. Other categories, like flights or hotel stays, may be available on both types of cards.

    2. Understand your expenses

    Before choosing a business credit card, it may be a good idea to evaluate your business expenses. Consider how much money you spend on important categories such as travel, client entertainment, office supplies and other expenses.

    Based on this analysis, decide if it makes more sense to get a credit card with travel rewards or cash back so you can maximize the value of every dollar you spend. For example, if your business requires frequent travel, choosing a credit card that offers rewards for airfare or hotel stays may be best.

    Once you’re aware of your highest spending categories, you can create a plan to maximize these benefits based on the way the rewards program allows you to redeem your points or miles.

    3. Consider how you and your employees will use the credit card

    Another factor to consider is how you and your employees will actually use a business credit card.

    • Determine how many employees will have access to the line of credit.
    • Think about your business's payment policies and how the card fits into those policies. Evaluate the need for expense tracking and reporting features and see if the credit card you’re interested in offers these kinds of tools.
    • Create a written policy for the use of company credit cards. It should define who is allowed to use the card as well as specific purchases that are allowed and any spending limits. There should not be any ambiguity on the situations in which the credit card is allowed to be used. 

    4. Examine features and rewards of relevant business credit cards

    You’ll likely want to consider which credit card rewards programs fit your business needs or offer rewards in categories that line up with where your business tends to spend the most. In addition, you can evaluate additional cardmember perks, such as insurance coverage or protections that are important to you.

    Weighing these big-impact features may help you determine which credit card is best for you.

    5. Ensure you know all the details about interest rates and annual fees

    One of the most important things you can do before applying for any credit card is to understand how interest rates and APR work and what is most cost-effective for your business. For example, it’s probably not wise to choose a credit card with high-interest rates or annual fees just to get rewards.

    Consider any extra expenses you’ll encounter such as annual fees, foreign transaction fees and late fees. You may want to look for credit cards with no annual fees or with a low introductory rate offer that lasts for a specified period of time.

    No matter what card you choose, ensure that you understand the terms and conditions before applying.

    In summary

    A business credit card can be a helpful way to finance the growth of your business through access to credit and the potential to earn rewards. 

    Choosing the right business credit card depends on the specific needs of your business. Understanding your company’s spending patterns, as well as knowing all available features and perks can be helpful when deciding which card(s) to apply for.