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How to choose the best business credit card

October 8, 2011

Many small businesses use credit cards to manage expenses. With such a vast array of offerings in the marketplace, what should you look out for when choosing a business credit card supplier?

In the early stages of setting up a new business, many small business owners use personal savings and borrow from friends and family to get things off the ground. Out of personal choice or necessity, many start-ups will also take out loans or use credit cards to give them the funding they need to get their new venture off the ground.

For personal credit cards, the obvious advice is to seek low interest bearing cards, with 0% or low rates on borrowing, and long interest-rate free periods.

Business Credit Cards – How to choose the best one

Business credit cards, on the other hand, can provide a convenient way to manage company expenses. Rather than claiming back expenses which have been paid for personally, it is always simpler from an accounting point of view to pay for all business spending on a business card. This can either be a debit or credit card.

So, what should you look out for when choosing a business credit card provider?

1. Interest Rate

As with personal credit card rates, many typical APR rates are in the high teens, despite the base rate being at record lows.

2. Interest-Free Period

Most business credit cards allow you to make interest-free purchases providing you pay off the balance in full at the end of each statement period. This gives you between 30 and 60 days of interest free credit, which can be more than useful when you are starting your business.

A few cards also offer an initial interest-free period on purchases you make during an introductory period, usually 3 months. This can be be very handy, and give you a little breathing space, while you wait for the income from your new business to build up.

3. Online access to your transactions

It will make administration easier if you are able to track your spending online, especially if you plan to put a large number of transactions though the account, so check that this facility is available.

4. Credit Card Fees

The majority of business cards are subject to an annual fee. These can be quite hefty in some cases, so find out what you can expect to pay per cardholder.

If you dig around though, you should be able to find one or two options that don’t charge an annual fee. At present, the Capital One Aspire Business credit card is one such card.

5. Credit Limit

You are likely to start on a pre-determined limit, especially if you are a new business, however this can be raised over time if the account is managed well.

6. Charge Cards

If you are looking for an easy way to keep track of all your business spending, but don’t want a credit card, a charge card may be more appropriate. Aside from an annual fee, you should not pay any interest on your spending as your balance will be paid in full at the end of the billing cycle (up to 56 days in some cases).

7. Cashback

Some card providers will give you cashback on purchases. This can range from 0.5% up to 5% for purchase made within an introductory period. The amount you can receive is usually capped, so make sure you check the details.

If you are planning on making a number of significant purchases, choosing the card with the highest cashback will make sense.

8. Additional Benefits

The major providers offer extra perks for business account holders, including purchase payment protection, airmiles, and discounts on everything from business insurance to company breakdown cover.

9. Simplicity

Most of the major banks will offer you a credit card facility when you open a new business account. You may find that this is the easiest option – particularly if you intend to pay off the balance in full each month and don’t need the credit.