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5 Questions to Ask Before Getting A Business Credit Card
August 21, 2018
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5 Questions to Ask Before Getting A Business Credit Card

Getting a business credit card might seem like a logical step for a new company, but there’s numerous components to consider first. Business credit cards operate differently than personal cards, especially when it comes to legal protections. You might be surprised to learn that business credit cards aren’t subject to legislation minimizing fees and interest rate increases. They also don’t have to include consumer protections for theft.

Still, business credit cards have perks that personal ones can’t offer. They’re separated from your personal credit, so you don’t have to worry about your FICO score dropping with an increased utilization ratio. It’s all about determining whether a specific business card is right for your company.

Can You Answer These Critical Questions About Getting a Business Credit Card?

1. How Healthy Is My Business?

The first question you should ask has nothing to do with credit cards. Before conducting research, complete a self-assessment. Ask yourself, how well is my business doing? Are sales steady? Are any large bills due soon? To get the best rates on business credit cards, your finances need to be in top shape. Additionally, you should be comfortable paying off your card balances before interest fees kick in. It’s also important to remember that sometimes your personal credit score could be used to determine your creditworthiness, so make sure it’s as high as possible before applying.

2. What Do I Need the Credit Card For?

If you assess your business health and like what you find, the next question to ask is what you’ll be buying with the card. Business cards come with higher lines of credit than personal ones, so your options are open. Are you making a one-time purchase of new equipment? Or maybe you’re trying to smooth out monthly spending? Mapping out how you’ll be using the card makes the decision process simpler.

Many cards have an introductory period where no interest is charged on purchases. If you’re making a one-time equipment purchase and could use an extra six months to pay it off, one of these 0 percent cards are better bet than a loan. Just ensure that you can pay off the balance in full before the zero-rate period expires.

3. Can I Get Rewards That Benefit My Business?

Business credit cards come with an entirely different set of perks than personal cards. While some common rewards like cash back on gas and airline miles can be beneficial to business owners, not everyone travels for work. Perhaps you’d benefit more from receiving discounts on internet and phone services, or from getting cash back when you purchase office supplies. If this is the case, look for a card that has these types of rewards instead.

Business credit cards have perks more tailored to, well, business. For example, the American Express SimplyCash Plus Card offers 5 percent cash back on wireless phone services and 3 percent cash back on another category of your choice (from a selection of 8 categories). If your employees need cell phones, this card will be a great money saver. Plus, you’ll receive 15 months with no interest fees!

4. How Much Will It Cost to Use the Card?

Nothing is free in the world of finance, and credit card companies certainly aren’t lending out of the kindness of their hearts. Before applying for a business credit card, find out what the fee structure and interest rates are. Ask yourself, how much is a late payment fee? How soon can the card provider raise my interest rate? Business credit cards don’t fall under the CARD Act of 2009, so unscrupulous companies can increase your interest rate overnight or charge more than $25 for a late fee. Be sure to read the fine print and ask plenty of questions to the card provider’s representatives. Your business doesn’t need any unpleasant surprises.

5. What Protections Does the Card Have?

Because business cards don’t fall under the CARD Act, they don’t have to offer consumer protections for fraud and theft. This is bad for customers and most business cards will protect you from scammers anyway. Still, there are companies out there that don’t extend these benefits. How do you find out which is which? Ask! If the card that best suits your business doesn’t offer certain safeguards, make sure you know what to expect if your card gets stolen or misused.

Conclusion

Business credit cards have plenty of advantages over personal ones, but they also aren’t regulated and could cost you more than they’re worth. Be picky when it comes to selecting a credit card and only pick one that serves your company’s best interests.

Fora Financial

Editorial Note: Any opinions, analyses, reviews or recommendations expressed in this article are those of the author's alone, and have not been reviewed, approved, or otherwise endorsed by any of these entities.

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Fora Financial is a working capital provider to small business owners nationwide. In addition, the Fora Financial team provides educational information to the small business community through their blog, which covers topics such as business financing, marketing, technology, and much more. If you’d like to see a topic covered on the Fora Financial blog, or want to submit a guest post, please email us at [email protected].
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