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How do I Choose the Best Small Business Credit Card?

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  • Written By: Brenda Scott
  • Edited By: Bronwyn Harris
  • Last Modified Date: 29 November 2016
  • Copyright Protected:
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    Conjecture Corporation
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Credit cards are an important source of short-term financing for small businesses. If used properly, the card offers accountability in expenditures, a way to stabilize cash flow, and a ready source of credit for emergency or capital expenditures. Finding the best small business credit card for your company will involve evaluating the type of financing needs the business has and comparing the features offered by different cards. Some of the features to examine are annual or membership fees, interest rates, grace periods, types and sizes of credit limits, and the kind of bonus programs offered.

One of the first steps to take in choosing the best small business credit card is to evaluate your business needs. If the business has a relatively consistent, 30-day customer payment cycle, and credit is only needed periodically, then a card which offers a high credit limit and discounts for early payments may be best. If the business clients do not necessarily pay on a thirty-day cycle, then the best small business credit card may be one that charges a low interest rate and allows payments to be spread out over a period of time. Some credit card companies also offer interest-free grace periods from 15 to 90 days, depending on the type of card and company credit rating. This can be a beneficial feature if customer receipts lag behind periodically.

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Some companies require employees to purchase supplies or pay for expenditures while traveling. Instead of using petty cash, with all the related accounting difficulties, a company may find that the best small business credit card will be one which offers additional cards, with adjustable limits, for specific employees. This allows greater accountability because the credit card company will issue itemized statements detailing expenditures for each individual card. Many credit companies offer these additional cards free, while others may charge a small fee.

Some cards allow periodic payments and offer lower interest rates with preset credit limits. If a company does not experience large, periodic spikes in inventory purchases, this may be the best small business credit card choice. On the other hand, if a company has large, periodic expenditures, it may wish to go with a card that requires a fee or charges a higher interest rate, but does not have a preset credit limit. Once a decision has been made regarding the type of credit limit the company requires, it is good to compare interest rates, which may be set or tied to the prime rate plus an additional percentage.

Another feature to examine is the bonus program offered by the card company. Some offer discounts for shipping, office supplies, or for items purchased from related companies. If a business requires a great deal of travel or client entertainment, then the best small business credit card may be one which offers discounts on airline fares or at restaurants. Some businesses actually factor these discounts into their overall budgets.

Most credit card companies, including those in the US, UK and Canada, offer fraud protection. If a card is used illegally, the company will not be liable for the charge as long as the theft is reported promptly. This is an essential feature for a small business, and offers a much more secure method for on-line purchases than using a debit card. After choosing the best small business credit card for your company, make certain that the same financial discipline is applied to using the card as with any other financial obligation. When used properly, credit cards can play an important role in contributing to the smooth financial operation of a small business.

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