Charge! How to find the right business credit card

Small business credit cards – which took a back seat during the recession – are on the way back, according to credit cards.com, and business owners are starting to see an increase in card offers coming their way. Many in the credit industry see this as a positive sign that the economy is on the uptick.

According to the Federal Reserve, 83 percent of small business owners use either a consumer or business credit card. So now is a good time to research how a business credit card can benefit your operations, or to re-evaluate existing business credit card plans to take advantage of best rates and current offers in the marketplace.

Why switch over to a business credit card if you’re using a consumer card? A business credit card often provides higher spending limits, can help build credit history for your company, provide you with short-term loans, offer discounts with vendors, and make expense reports a thing of the past. Because of the higher risk, however, business owners and employees will typically undergo credit checks.

Basically, there are two options for business credit cards: small business and corporate credit cards. The decision on which option to choose is based in large part on the size of your business and who is responsible for the debt.

As the names imply, a corporate credit card is for large businesses and corporations and the burden of debt typically falls on the corporation. A business credit card is intended for smaller businesses with sole proprietors and the burden of debt is on the owner. Unless your business is producing more than $2 million annually in gross income, a corporate credit card isn’t an option.

Before you choose a card

If you’re thinking of choosing and implementing a new business credit card approach, consider the following:

• Do your research. Many banks and credit card companies – both local and national – are making various offers with perks that may fit nicely with your business needs. Offers run the gamut, so be choosy.
• Don’t get burned by special offers. Pay specific attention to business credit card plans with introductory offers of 0 percent APR. While this may be a good option for an immediate, high-end purchase to support your business, you need to find out what the conditions for the APR are – under what conditions will it increase? And what are your options if it does?
• Consider the rewards. Many cards offer perks for both you and your employees including discounts with preferred vendors and airlines, as well as rewards points.
• Lay the ground rules. Make sure your employees know exactly what can and cannot be charged on the credit card. Some cards let you adjust the credit limit on individual employee cards as well as limit where the cards can be used. Make a point to pay off the monthly bill.

What about the Credit CARD Act? Business credit cards are exempt from the 2009 Credit CARD Act, which limits when consumer card issuers can increase interest rates and bans billing and payment practices that the Federal Reserve deems unfair or deceptive.

So, business buyer beware, as always.

Pam King is president/CEO of the BBB serving Northern Colorado and Wyoming.

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