How to Choose the Best Credit Card for Your Small Business

If you own a small business, you have a lot (and we mean a lot!) of responsibility. We understand that getting any type of support to streamline and increase the efficiency and profit of your company is a welcome treat.

A business credit card is one of the best, and most common, ways to support your company. It can help your company with daily operating costs, monitoring ongoing expenses, and assisting in the overall management of your organization.

You may wonder why you would want a business credit card for your small or medium-sized business, especially if you already have a personal credit card. Read on to learn the extraordinary benefits of a small business credit card and how to choose the best one for your business.

7 Factors in Choosing a Small Business Credit Card

There are many reasons why a small business owner might consider getting a business credit card. The good news? You typically don't need an incorporated business or brick-and-mortar store to apply for one.

With so many business credit cards to choose from, finding the right one can seem a little overwhelming. Here are some important factors, top features, and benefits to consider as you choose.

Credit Card Rewards Programs

You're already spending money on your business. Why not earn some of it back?

Many business credit cards offer rewards programs to earn cash back, points, or miles. All purchases on your business card account are eligible to earn rewards, even those made by your employees.

Some examples of rewards include:

• Shopping discounts and cash back on purchases

• Travel upgrades, like access to airport lounges, free checked bags, and priority boarding

• Priority dining reservations

• Discounts for online advertising

All these rewards can help keep your out-of-pocket expenses down. Having a company credit card with business perks makes for a win-win situation — you can essentially "save" money while spending it.

Credit Card Interest and Fees

Before you choose a credit card for your small business, ask about interest and extra costs. Paying interest with any credit card makes your purchases more expensive. The best way to avoid interest is to pay in full.

If you think you'll need to carry a balance from time to time, ensure you understand the Annual Percentage Rate (APR). Generally, the better your credit score is, the more likely you are to qualify for a lower interest rate and APR. Even when you do find a low interest rate, make sure to read the fine print. You don't want to be surprised to find that the rate was only temporary.

And don't overlook annual fees. Usually, the better the rewards program and the more features and benefits the card comes with, the higher the fee. There may also be fees for cash advances and other transactions. Consider how you plan to use the card, and do your due diligence to make sure the benefits outweigh the costs.

Manage Employee Expenses

Your employees may need to spend money to support the business. But it can be a hassle to reimburse each person for any business spending they do using their own personal credit card. Choosing a business credit card can be a smart way to manage the money that others in your organization spend. It can also help you stay on top of where your hard-earned dollars are being used.

However, there are challenges you may face as well, like deciding who gets a credit card. Issuing too many cards to too many people can lead to a lack of control, accountability, and unnecessary costs. That's why it is important to consider setting spending limits and have the option to freeze cards if needed. Take the time to communicate clear policies about spending, acceptable expenses, and when and where it’s acceptable for your team to use their company cards.

Higher Spending Limits

Business credit cards tend to offer higher limits than personal credit cards. This allows you to make purchases that may not be possible using only the cash your company has on hand. A high credit limit can mean the difference between growing your business significantly or stagnating.

But remember — this is not a reason to use company money for frivolous or unnecessary purchases. You will still have to pay off your credit card debt, regardless of what the funds were used for.

Establishing Credit History

Small business credit cards help establish a line of credit that can be used to make purchases for your business, from office supplies to manufacturing equipment. By using your business card regularly and being punctual with payments, your company can build a solid credit rating that grows over time. This will help your business qualify for long-term loans in the future.

When your company doesn't have the cash available to afford some of the essential things you need, a loan or line of credit can allow you to make necessary purchases (potentially with interest-free financing) to keep your shelves stocked.

Protection

Business credit cards provide numerous travel and purchase protections, such as cell phone protection, trip cancellation insurance, travel accident insurance, baggage delay insurance, auto rental coverage, and roadside assistance. Even everyday support, like extended warranty protection, can be an advantage of having a business credit card.

Data and Management Tools

Ask if the credit card process provides monthly, quarterly, and year-end summaries to track spending. A good small business credit card will help simplify your company's finances. And could even make tracking expenses easier for your team to identify potential tax deductions come tax season.

Check if you can download purchase records to your in-house accounting programs. This feature can allow you to sync your credit card expenses with your company's bookkeeping software for faster reconciliation. This integration helps automate mundane tasks like expense reporting thereby improving your accounting productivity.

The Bottom Line

A business credit card can help you keep your small business running smoothly, and it's a simple way to separate your personal and business expenses.

Using a small business credit card can reap short- and long-term benefits that help strengthen your spending and earning power as your business grows. It’s worth taking your time choosing the best business credit card with the features that best fit your needs.

Justworks can also help set your business up for future growth. As a Professional Employer Organization (PEO), we support your business with payroll, access to benefits, compliance support, and more to help you confidently run your business.

Ready to get started? Together, we can build a program that works for your business.