Small-Business Credit Cards

What You Should Look For

Although many of the business credit cards currently available are similar, no two are exactly alike. Find one that suits your situation by choosing carefully.

"Even before you go shopping for a card, sit down and prioritize your needs," says Chanaud. "If low rates are more important than a lot of features and benefits, then look for the cards that offer the lowest rates. Or, if you decide you want features and benefits, make sure they actually fit your specific needs." A card with travel benefits won't do you much good if you rarely travel. Also, take a look at samples of the quarterly reports, suggests Chanaud. "See if they have information you can actually use," she says.

When choosing a card, keep the following additional considerations in mind:

  • Look closely at the Annual Percentage Rate (APR). Interest rates can vary greatly. Some companies have a fixed rate, while others offer a specific rate plus prime. The prime interest rate is currently 8.25 percent. Although the prime interest rate doesn't change often, it can--which makes your interest rate subject to change. It's a good idea to educate yourself on what's available, as a few percentage points can make a big difference in what you'll end up paying for your credit.

  • Consider annual fees. Some companies charge an annual fee per card, which may be cost-prohibitive if you intend to distribute cards to several employees. Other issuers have no annual fees at all.

  • Compare grace periods. "The grace period applies to purchases only," explains Chanaud. "It is the period during which there is no interest charged, from the statement date until the due date. In reality, this means that from the date of purchase to the date that the statement is cut through the due date, there are no finance charges. At a minimum, it is 25 days, but conceivably, it could be twice that, depending on your date of purchase and the cycle cut. Most small-business credit cards offer a 25-day grace period. The longest grace period is the best."

  • Check out maximum credit limits. You may not need $100,000 in credit now, but as your company grows, the need for more credit is likely to become an issue. Choose a creditor that will allow you to expand as needed.

If you will be distributing cards to various employees and would like to control and limit spending, you will want to choose a company that can put different credit limits on each card. Some companies, like Wachovia, are able to apply a daily spending limit to each card, and they can even restrict at which merchants the card can be used.

  • Protect yourself. Make sure the card you choose has a waiver of liability insurance, which protects you from misuse of the card by terminated employees.

  • Consider the cost of added features. Some of the bonus features, such as airline-mileage programs, charge a start-up and a yearly fee. Before signing up, make sure these are programs you will actually use.

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This article was originally published in the January 1997 print edition of Entrepreneur with the headline: Small-Business Credit Cards.

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