Small Businesses

How to Choose the Best Credit Card for Your Small Business

How to Choose the Best Credit Card for Your Small Business
Image credit: Sean MacEntee | Flickr
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Although the number of firms affected by the credit crunch continues to drop, one-third of small firms still struggle to access necessary financing. In fact, nearly one in five small firms can’t meet an increase in demand due to the inability to receive financing.

If you pay your bills on time each month, business credit cards can be an invaluable resource to running a successful business.  

Related: 4 Things You Should Know About Business Credit Cards

What are your business needs?

All businesses are different from industry to size, so there is no one-size-fits-all credit card. In order to narrow your search, you must first understand what your specific needs are. Here are four different types of business credit cards:

  • Corporate credit cards are designed for large businesses with many employees such as government entities, charitable organizations and of course, corporations. Many corporate accounts also issue free employee credit cards. The corporation is the responsible party for these types of accounts, so it’s important to closely monitor the spending activity on your employee-issued credit cards to ensure you’re not paying for personal expenses. 
  • Special interest credit cards are designed to meet a specific need. For example, the CitiBusiness/AAdvantage Platinum Select World MasterCard is great for business owners (and their employees) who frequently fly with American Airlines. Alternatively, the Ink Plus Business Card from Chase offers five-times points for purchases made at office supply stores, cell phone, internet, and cable TV. If those aren’t expenses your business regularly incurs, this would be a bad business card for you.
  • Charge cards are credit cards that require the bill to be paid in full at the end of every billing cycle. These should only be used for businesses that can both remember and afford to pay their bill off each and every month. Charge cards offer the same types of features as standard business credit cards, but the payment requirement is stricter.
  • Low interest credit cards are perfect for business owners who need additional capital but are unable to pay off their balance every month. If you tend to carry a balance, you will want to compare business credit cards that offer 0 percent APR for a certain number of months, such as the Ink Cash Business Card that offers 0 percent intro APR for 12 months.

Related: The ABCs of Business Credit

Check your credit scores

You never want to blindly apply for a credit card without knowing your score. Doing so will just create a hit (hard inquiry) on your credit report, and you’ll still have no access to credit. It wouldn’t make sense for someone to apply for a credit card that requires excellent credit when they know their credit score is 600 (fair credit).

Business owners typically have two credit scores that can be used to determine the credit worthiness of the company: the owner’s credit score and the business’ credit score. What makes business credit scores different is business scores must be set up by the business owner -- they aren’t automatically reported. Maintaining a separate business score from your personal credit score is important in order to establish a credit history with your business. Read more about business credit scores and how to build your score.

Most credit cards will require the business owner's SSN to open a business credit card account unless the business is well established with strong revenues. This will vary by issuer and account type, so it’s also a good idea to check your personal credit score before applying for a new credit card.

Related: 4 Reasons You Need a New Credit Card for Your Business

Choose wisely

There’s no way to know if you can get approved for a credit card before you apply, but you can deduce your options with some research! For example, Chase (a credit card issuer) isn’t going to flat-out state that anyone with a credit score below 600 can’t get approved for the Ink Plus Business Card. What you can do, however, is perform a few Google searches to help make a more educated guess. For example, if you ask Google, “What credit score is needed for Ink Plus Business Card?”, you’ll get countless search results of answers, mostly coming from credit experts and consumers that have experience applying for that specific credit card.

Now that you understand where your business makes the most purchases and know both your business and personal credit score, you’re ready to start comparing business credit cards.