Friday, February 6, 2015

Don’t Buy Your Small Business with the Wrong Credit

Choosing the Right Credit Card for Your Business

In recent years, with the popularity of opening a small business on the rise, credit card companies have been expanding their offerings for small business credit cards. In many cases it is much easier for a start-up company to apply for and obtain a credit card than it is for them to establish a line of credit through a bank or credit union. Since having a credit card is a great way to establish a credit history, many small business owners are choosing this option when it comes to financing their business ventures.

But, which credit card is the best choice when buying items to start a small business? There are many questions that business owners should consider before making a final choice – what are the business’ spending habits? What is the annual percentage rate? Will you be paying off the balance of the card every month? Although all credit card companies make plans seem like the best out there, it is important to consider all the available options to make sure you are choosing the correct card.

Are You Carrying a Balance or Paying the Balance Each Month?

How the credit card will be paid off is an important part of choosing the right credit card plan. For many small businesses, paying off the balance of the credit card each month is simply not doable, so it is important to consider that you will be carrying a balance every month. If that is the case, look at different company’s interest rates – some companies will offer a low or even 0% interest rate as a teaser, so make sure to research what the rate will be after that initial introductory period.

If you plan to pay the balance off every month, the interest rate won’t be as much of a concern, so try and look for credit cards that offer longer grace periods – this is important if you can make the payments each month, but not necessarily right on time. Also, look at the company’s annual fees – even though the interest rates may be low, they may try to stick you with a high annual fee. If carrying a balance isn’t a concern, there are other options that you can look into, such as more generous rewards

What Credit Card Rewards are Important to You?

Many credit card companies are now offering small business card holders more rewards programs, such as airline miles or cash back. If you or your employees will be doing a lot of traveling, consider looking for a credit card that offers generous airline miles – this will allow you to double dip by using the card to pay for the travel and then using those same points for a free, professional or personal, trip. If your business just makes a lot of general purchases, look for a card with a great cash back percentage.

Having a credit card, either personally or professionally, is an important responsibility and it is vital to take it seriously. Make sure to never spend more than you can realistically pay back even if it is for your business and always strive to make payments on time – late or missed payments can have a severe negative effect on your credit report. Additionally, some companies will void any rewards the card has earned if a payment is missed or made late as well as assigning late fees or penalties to the account.

*Photo Courtesy of Sean MacEntee via Creative Commons License

No comments: