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Selecting the right credit card for your business

Part 1 of a three-part series on credit cards.

With the credit card industry growing at its fastest pace ever, according to the Nilson Report, businesses are being deluged with credit card offers. Is a credit card appropriate for your business, and if so, which type should you select?

Right for your business?

At one time, business credit cards were used primarily by large corporations, but today businesses of all types and sizes wield business credit cards. According to the Small Business Administration, 65% of small businesses use credit cards on a regular basis. There are many great reasons to consider getting a business credit card:

  • Widespread eligibility – Even if your business is a sole proprietorship without a federal ID number, you may be eligible for a business credit card.
    Each credit card company has different criteria for the information required to get a business card. Be prepared to provide at least your Social Security number.
  • Fast credit access – For start-ups, it’s often much easier and faster to open a business credit card account than to open a line of credit.
    Tip: If you’re a new business owner, a credit card can help you manage your cash flow; just be sure to use your credit wisely.
  • Simplified expense-tracking – Using a business credit card instead of a personal credit card for business expenses can make expense-tracking easier for your bookkeeper or accountant.
    Tip: Before applying for a particular business credit card, ask how and when expense reports are provided.
  • Sign-up bonuses and rewards – Because the business credit card industry is so competitive, nearly all card issuers offer some type of sign-up bonus, points or dollars for use, or both. Many cards also offer other rewards, such as discounts at certain retailers, access to airport lounges and hotel upgrades.
    Tip: Before locking into a particular card, read the card’s terms. Some cards may charge an annual fee that doesn’t fit your spending patterns. Other cards may only issue rewards on certain purchases, such as gasoline.
  • Additional credit history – Many small business credit card issuers report business card activity to both consumer and commercial credit bureaus; some report only to commercial credit bureaus. Either way, establishing a quality credit history through your card use can help when you’re seeking other types of credit.
    Tip: When applying for a business credit card, ask how the issuer reports your card use to credit bureaus.
  • Purchase protection – While purchase protection and insurance is typically less generous on business credit cards than with personal credit cards, you’ll still be protected against fraud and unauthorized use, helping preserve your bottom line.
    Tip: Some business credit cards offer additional warranty coverage, purchase protection and car rental insurance; check when applying.

Today’s business credit card options and uses are plentiful, and selecting the best card for you is just the first step in using these financial tools to their fullest potential. Next up in this three-part series, we’ll share a few tips on managing the risks associated with business credit cards. 

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The information contained herein may not represent the views and opinions of California Bank & Trust, a division of ZB, N.A. or its affiliates. It is presented for general informational purposes only and does not constitute tax, legal or business advice.
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