How to choose a business credit card
Quick insights
- Business credit cards can help separate business and personal expenses while offering features such as employee cards, expense management tools and rewards on eligible business purchases.
- Compare rewards categories with where your business spends the most, such as travel, office supplies or phone and internet services, to determine which card features may align with your spending patterns.
- Consider a card’s credit limit, interest rate, fees and rewards structure together to understand the potential costs and benefits before applying.
A business credit card can be a helpful tool to manage your business expenses, leverage the available credit to make strategic purchases and help 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 individual use business credit cards cater to the specific needs of running a company, including 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 may qualify for 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, take a closer look at where your business spends money each month. Reviewing your expenses can help you compare card features and rewards with the way your business actually operates.
- Identify your largest spending categories: Review recurring expenses such as travel, client entertainment, office supplies, advertising, shipping and phone or internet services.
- Compare rewards with your spending: If a significant portion of your expenses falls within certain rewards categories, consider how much eligible spending could earn points, miles or cash back.
- Review redemption options: Look at how a card allows you to redeem rewards, as redemption options and values can vary by credit card and rewards program.
- Consider costs alongside rewards: Factor in the card’s annual fee, interest rate and other applicable fees when evaluating the potential value of its rewards and benefits.
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.
- Draft a written policy describing the use of company credit cards. The policy should outline who is authorized to use a card, the types of purchases that are permitted, and any applicable spending limits. It should also clearly specify the circumstances under which a company credit card may be used to ensure expectations are consistently understood.
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 important thing 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.
Consider any extra expenses you’ll encounter such as annual fees, foreign transaction fees and late fees. You may want to consider a card with no annual fee or with a low introductory rate offer that lasts for a specified period of time.
No matter what card you choose, review and 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.
