A Small-Business Credit Card Guide
There’s no understating the value of a good credit card for any small business. It provides a line of credit for investing in supplies and fulfilling invoices, healthy cash flow for daily operations, and even potential rewards. But the wrong card—or a poorly managed one—can imperil an organization with excessive fees and a declining credit score.
Whether you’re looking to maximize your current program or are interested in swapping to a more optimal service, review this guide to discover three top small-business credit cards along with smart strategies for using them effectively.
Great picks for any business
Well-rated and appealing to various needs, each of these products is designed for everyday transactions. (Note that any introductory offers or other details mentioned are subject to change.)
American Express Business Gold Card
Pros: With its generous rewards structure, this option is considered the gold standard of credit cards. For example, new enrollees can earn 100,000 points after spending $15,000 in the first three months—a total that is likely easy to hit if you use the card for a large percentage of your purchases. Plus, points can roll in quickly thanks to the 4X points system that quadruples rewards in your two highest spending categories; you can also earn 3X points on travel and 1X points on all other purchases.
Rewards points can be used in various ways, though NerdWallet notes that they may be best utilized for redeeming gift cards or to pay for travel. Add in its additional travel perks such as rental car insurance and its Global Assist Hotline, and this may be the ideal credit card for businesspeople on the go.
Cons: The Gold Card has a substantial annual fee of $375, and to qualify, you will likely need a personal credit score of at least 690 (considered “good”). Also, the variable APR caps at 28.49 percent, which is relatively high, so if you land such a rate, you will want to be sure you are able to pay off your bills in full each month; otherwise, interest may quickly drain your revenue. Small businesses that are fee averse may prefer an American Express Blue Business Card or another option on this list.
Capital One Spark Cash Plus Card
Pros: If you’re seeking a low-maintenance credit line, this Capital One business card may just be the one for you. It has a small annual fee of $150, requires no foreign transaction fees, and offers unlimited 2 percent cash back on any purchase, no matter the category. You earn an introductory $2,000 cash bonus for spending at least $30,000 within the first three months, and the annual fee is refundable should you spend more than $150,000 in one year. Perhaps the most unique feature of this card, though, is its 0 percent APR—that means no interest for charging.
Cons: The chief benefit of this card may also be its main drawback: it has no APR because your total balance is due in full every month, no exceptions. If you fail to pay off all your charges, you’ll be hit with a 2.99 percent late fee and your account will be considered past due, which can potentially impact your credit score. If you’d prefer the flexibility of being able to let purchases roll over to the next billing cycle, you can opt instead for a Spark Cash Select card, featuring similar rewards, no annual fee, and other possible perks.
Chase Ink Business Cash Card
Pros: This credit card earns zeros where it counts, offering free membership, no liability on fraudulent charges, and a 0 percent introductory APR for the first twelve months. Afterward, a variable 18.49–24.49 percent APR applies, which still scales on the lower end when compared to many other business cards.
Like the previous two options, the Ink Business Cash program tenders cash back rewards, starting with a bonus of $350 simply by spending $3,000 in the first three months, plus an extra $400 after spending $6,000 in the first six. You also earn varying levels of cash back for every purchase you make on your card, with the highest being 5 percent for office supplies and telecommunications bills—possibly your largest spending category depending on your industry.
Cons: You’ll need a personal credit score of at least 690 to qualify, so this program may only be suitable for an established business already in good financial standing. Some other minor limitations include a $25,000 annual spending cap on the 5 and 2 percent cash back categories, after which you default to the 1 percent cash back you get for all other purchases. Also, additional benefits like a 10 percent bonus cash back on your first anniversary only apply to members holding Chase Business Checking accounts. For a potentially more rewarding program, consider the Chase Ink Business Unlimited card, through which you can earn 1.5 percent cash back for all purchases with no spending cap or limits.
Charge wisely
While shopping dutifully for a credit card can pay off, it’s essential to manage your card prudently as well. Chiefly, always pay your bills on time and, when possible, in full to avoid facing late charges and earning excessive interest. To do this, you may need to budget for your business expenses, then charge only as much as you can reasonably expect to pay off when your credit card bill arrives. If you need more funds to secure substantial capital, remember that other lower-interest options are available.
Finally, monitor your statements regularly so you can stay on top of transactions, track your rewards points balance, and identify fraudulent charges. Such vigilance can also sustain your familiarity with the terms and charges associated with your chosen card program.
Beyond its benefits to your cash flow, using a small-business credit card wisely can help build your organization’s credit score over time. This is particularly true if you maintain a low credit utilization ratio (the amount of credit you’re using compared to your total credit limit) and demonstrate a consistent payment history. And once you strengthen your credit profile, you may achieve access to financing at lower interest rates, qualify for credit cards with greater rewards, reduce your insurance rates, and attain myriad other cost-saving benefits that can assist you in leading your business to greater success.
TAKE ACTION:
Weigh the various benefits of obtaining a business credit card, find the right one for you, and then establish a plan to utilize it successfully.