If expense reports are piling up and processing employee reimbursements is using staff resources, it might be time to consider a business credit card. Better Business Bureau offers advice to business owners on choosing the right credit card for your business.
According to a 2009 survey by the Board of Governors of the Federal Reserve System, 83 percent of small businesses used credit cards, 64 percent used small business cards, and 41 percent used personal cards.
For small business owners, now may be a good time to research how a business credit card can benefit operations, or to re-evaluate existing business credit card plans to take advantage of best rates and current offers in the marketplace.
“There are many ways that a business credit card can make life easier for an owner and the company’s employees,” said Matthew Fehling, BBB President/CEO. “It can build credit history for your company, provide you with short-term loans, offer discounts with vendors, and make expense reports easier to manage.”
Basically, there are two options for business credit cards - small business and corporate credit cards. The decision on which option to choose is based in large part on the size of the business and who is responsible for the debt.
Generally, a corporate credit card is for large businesses and corporations and the burden of debt typically falls on the corporation. A business credit card is intended for smaller businesses with sole-proprietors where the burden of debt is on the owner. Unless a business is producing more than $2 million annually in gross income, a corporate credit card isn’t the best option.
A business credit card is very similar to a personal credit card and carries a credit limit and minimum monthly payments. Business owners and any employee who will use the card will typically undergo a credit check.
BBB offers the following tips for choosing and implementing a new business credit card approach:
- Do your research. Many banks and credit card companies are currently making offers, with some attractive perks that may meet your business needs. Research offers from both local banks and national credit card companies.
- Don’t get burned by special offers. There are many offers and plans available for small business owners, but pay close attention to business credit card plans with introductory offers for 0% APR (annual percentage rate). While this may be an option for an immediate, high-end purchase to support your business, research the conditions for the APR – under what conditions will the rate rise, and what are your options if it does rise. Beware of getting stuck with a high APR after the introductory period.
- Consider the rewards. Many cards will offer perks for both you and your employees including discounts with preferred vendors and airlines, as well as rewards points.
- Lay the ground rules. Make sure your employees know exactly what can and cannot be charged on the credit card. Some cards will let you adjust the credit limit on individual employee cards, as well as limit where the card can be used.
For additional tips on managing your business’ finances, visit www.bbb.org.
About BBB Serving Central, Northern & Western Arizona
BBB is an unbiased organization that sets and upholds high standards for fair and honest business behavior. Businesses that earn BBB accreditation contractually agree and adhere to the organization’s high standards of ethical business behavior. Incorporated locally in 1938, today your BBB serves communities in Central, Northern and Western Arizona, supported by over 9,400 BBB Accredited Businesses. BBB provides objective advice, free business BBB Reliability ReportsTM and charity BBB Wise Giving ReportsTM, and educational information on topics affecting marketplace trust.