This may be particularly so if you are a new business and you are just setting up – you will obviously have higher costs that need to be covered. If so, go for a low introductory rate card. These business credit cards offer a rate well below the usual average of 16% (sometimes going as low as 0%) for a certain period, often up to a year. These will effectively give you an interest free loan. On the other hand you must be careful to be able to pay them back at the end of the year because interest rates will go back up, leaving you with a debt problem if you cannot pay.
If, alternatively, you are an established business that does not expect to carry large amounts of current debt over month to month, then you should look for a different kind of business credit card
. Many companies offer business credit cards with lower APR (Annual Percentage Rates) to companies with a good credit history.
These are worthwhile looking at as they mean that if you miss a payment irregularly, and not just within the introductory period, you will not be punished too cruelly. Equally, some companies offer business credit cards that give rewards such as air miles and money back when certain amounts are used on the card. These are worth looking into to save your business a certain amount of money. It might be a good idea to talk to your credit company after a while of making regular repayments on your business credit card and ask them to lower your interest rate. It’s likely enough they’ll agree, as you’ll have proven yourself a reliable and valuable customer, and if not, the worst they can say is no.
Many business credit cards offer specific deals on different areas. For example, certain cards offer money back in one chosen area (which could be office supplies, flights, etc.). Choose the category you would use most and you will likely save money on your business costs. Be careful as always that these savings are not balanced out by hidden costs. Similarly, certain companies may offer their own credit cards that give savings when used on their product (e.g. airlines offering free flights when a certain amount is spent). Use these to maximum advantage, but don’t get carried away – remember you are paying annual fees on all your business credit cards whether you use them or not.
There are, of course, dangers to watch out for with business credit cards, as there are with any form of credit. You must be careful to stay within your limits, with a business credit card as much as with a normal one. Before you use it at an ATM, think about what the charges on cash withdrawals are for your business credit card (since it is technically an advance). It is still costly to treat a business credit card like a bank loan, even if it is more convenient, the charges are far higher. Consider whether you can afford every payment you make, and prefer to use cash whenever possible. As with all other areas of life, you are in trouble if you can’t make the payment on a business credit card by the end of the month. Late fees alone are worth nearly $3bn a year to American Express, which means it’s big business for credit card companies – don’t let yourself be one of them. That said, a business credit card is obviously not a bad thing, and once you have a handle on using one, they can be of great use in developing and running your business.
Credit cards are a vital part of many areas of life today, and it is no surprise that they are important to small firms as well. By following a few simple rules on using them and ensuring that you have the best possible value business credit card, you may find they greatly ease the running of your small firm, so why not look into applying for one today?