Business credit cards
Most small businesses have had the headache of running business and
personal expenses on a personal credit card. Sorting out what was for
business and what was for personal use when the statement comes each
month can be a perfect pain. Did that $97.48 spend at the stationery
store include Billie's crayons, or were the crayons part of the bill for
And does it really matter? Well, the taxman might think so. So might
your accountant when you want to know just how profitable is your
Enter the business credit card
According to a 2003 study by the Small Business Administration, owners
of 46% of small companies used their personal credit cards. Another 34%
used business credit cards.
Apart from simpler accounting, having a business credit card allows you
to build a credit history in the name of your business. Expect to have
to start small, because the credit limit will be based to a great degree
on your credit history. If your credit record is not good, you may have
to put up a cash deposit to get started.
Cards with small limits from issuers such as Staples, Office Max and
FedEx are potential starters. Some may require a personal guarantee.
Good credit management should result in offers with higher limits from
other issuers within a few months.
Advantages include discounts
A business credit card brings with it some other advantages. For
example, wholesalers will sometimes give discounts that are not
available to small businesspeople using personal credit cards. Many of
the cards carry travel and accident insurance. Rental car collision
insurance is another perk. Other issuers offer additional cards for
employees, each with their own individual credit lines, along with
detailed transaction reports on a monthly, quarterly and annual basis.
Another advantage, if you plan to pay balances on time and not use your
business credit card as a revolving charge card: free capital. You can
use the issuer's money without interest during the billing cycle. If you
know the date the cycle begins, you can buy expensive items early in the
cycle, delaying the use of company money.
What to look for in a card
Business cards come in a wide variety of flavors. Make sure yours is to
- If you expect to carry a balance, look for a low APR. The American
Express Platinum Business card has 0% APR on purchases and balance
transfers for nine months, then an APR (in May, 2005) from 8.74%. The
Blue Cash for Business card from American Express has 0% APR for just
six months, but it also gives cash rebates of up to 5%. There are no
annual fees with either card.
- Are there fees, and if so, will you
gain enough to justify payment of those fees? Most non-airline cards do
not carry annual fees. The Delta SkyMiles card is free for the first
- What kind of extra benefits would you like? Look for cards
that earn miles if you travel frequently, or those that offer incentives
from vendors. CitiBusiness PremierPass card offers free companion
travel, triple points on certain business purchases, and a wide
selection of rewards including no-blackout flights.
- What financial management tools does the issuer offer, and can they be accessed online?
The Advanta Platinum card offers detailed expense management reports and
online account management. You can even design your own card and have it
customized with your business name. APR is zero for the first 12 months.
- Is there flexibility to set different limits for different
- Is the card widely accepted, especially if you travel
overseas? This includes any of the Visa, MasterCard, Discover or
American Express cards.
- Can you access ATM machines with it
wherever you normally are? All of the major cards are accepted at most