If you don’t already have a business credit card, there’s no better time to start thinking about one—and the possibilities it opens up.
Business credit cards are perfect for financing a wide variety of everyday business purchases and expenses, providing a degree of flexibility that isn’t always possible with other forms of business credit.
Cards also make it easy to track your business-related spending and keep it separate from personal expenses. Most cards even come with business-related perks, like airline miles and/or cash back.
You can qualify for a card as long as you have a legitimate business that turns a profit, or will in the near future—even if you’re just a “solopreneur.” In fact, more than 65% of small business owners keep a business credit card in their back pockets.
That said, you should make sure to do some comparison shopping before choosing a card. You’ll want to make sure the card meets your needs—both long-term and short-term—and that you’ll qualify for it.
It may seem like a difficult decision, but there’s no need to get overwhelmed. Here are a few of the most important things to consider when choosing a business credit card:
1. Your needs and goals
Before shopping around, it’s important to determine exactly how you’ll use the card. For example, ask yourself what your monthly spending will be and what balance of perks and fees makes sense for your goals.
Here are the most important aspects to compare:
Fees: Many cards don’t charge an annual fee, but fees are more common for cards with generous bonuses and rewards, or with very low rates. Before choosing a card with a fee, do some quick math and make sure the benefits outweigh the costs.
Annual Percentage Rate (APR): Just like a personal card, if you plan to pay your balance in full every month, you don’t need to worry about paying interest. For those carrying a balance, however, the issuer will use this rate to determine monthly interest charges. If possible, consider a card that offers a low or 0% introductory APR.
Credit limit: Your credit limit doesn’t just affect your capacity to borrow—a higher limit also means you can keep your debt to credit limit ratio low, which is crucial for future borrowing.
Perks and rewards: Now the fun part! Most business credit cards offer perks like cash back, airline miles, discounts for hotels, and redeemable points. Rewards are great, but do your research—you want to make sure your card carries rewards that you’ll actually be able to earn and use.
Credit cards vs. charge cards: When shopping for a credit card, remember that you could also go with a business charge card. There are a few important differences, with pros and cons to each. For example, unlike a credit card, a business charge card must be paid in full each month, but it also doesn’t have a spending limit.
2. Your credit score
If your business is well established and leveraging other types of financing, your business credit history can help you qualify for a card.
But if not, you’re still in good company. The key difference for new businesses is that the card issuer will instead look at your personal credit score and history.
You can use services like AnnualCreditReport and Credit Karma to monitor your personal credit score, a major factor in qualifying for a card and scoring higher credit limits.
If you’ve been denied because of your personal credit history, the bank should tell you exactly why, which may help when it comes to improving your score.
If you have challenged credit, you might also consider a secured business card. Secured cards require you to put down a security deposit in cash, but can still help you earn rewards and build credit, which is critical for securing financing down the road.
3. The application process
Even if your small business is freshly minted, as long as you meet the requirements and have a good or excellent personal credit score, you should qualify for a number of business credit cards.
When applying, you’ll want to have your business info handy, including your legal business name, number of employees, gross sales, net profits, and federal tax ID.
As the business owner, you’ll also need to provide some personal information, including your name and address, social security number, personal income, and any outstanding personal debts, including mortgages.
Keep in mind that it’s critically important to be honest about your business and personal finances. Though small changes to your application might help you qualify for better terms, lying on your application is considered fraud and may be audited later.
Once you’ve sent your application in, you may hear back within seconds—but generally within several business days.
4. The next steps
Once you’ve been approved and your card is activated, the next step is to start using it responsibly.
You may be tempted to buy that shiny new toy right away, but don’t forget that carrying a balance will eventually lead to interest charges.
Most importantly, make sure never to miss a monthly payment, even if you’re only paying the minimum amount. Missed payments result in costly dings to your business’s credit history, and if your card reports to personal credit bureaus, they’ll hurt your own credit score, too.
With so many business credit cards available, choosing the right one can feel overwhelming. But by doing just a little bit of research, you can narrow your choices and find the perfect card for you and your business.
