The Small Business Owner's Guide to Credit Cards | CreditShout

The Small Business Owner’s Guide to Credit Cards

By Kevin / November 16, 2016
The Small Business Owner's Guide to Credit Cards


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Many small business owners and entrepreneurs already are aware of the many benefits of a business credit card. However with the changes in credit card laws, changes in credit card company practices and the lackluster economy, many seasoned veterans as well a new business owners and entrepreneurs may need a primer in finding the right card and avoiding common pitfalls and misconceptions.

What Businesses Benefit from A Credit Card?

Even the smallest entrepreneur, work-at-home types can benefit from a business credit card account.

Building good credit is paramount to sustain your business and aid in its growth. Improper or unwise use of business credit can literally run you and your business into the ground.

Finding the Right Card

The first thing you need to do in order to find the right credit card is to evaluate and analyze your business creditworthiness and spending habits.

Some of the questions you need to ask yourself include:

  • Do you currently have any outstanding debt? For example, a balance on a business start-up loan, any balances on industry specific credit instruments (i.e. Lowe’s card for a building contractor), business mortgage or vehicle loans or leases
  • Are you or have you used personal credit cards for business expenditures?
  • Do you have regular monthly expenditures? Or are your needs more on the “as they come along” nature?
  • Do you make all your payments on time on business and personal debt? Or do you pay off balances regularly so you do not carry large balances?
  • Or you looking to better time due dates for business expenses to match receipt of revenue?
  • Is your accounting method based on monthly or quarterly methods?
  • Do you keep an accurate accounting of all accounts receivable and payable?
  • Do employees often need access to funds for business purposes?
  • Does your business require regular travel expenses?

These are just a few of the questions you may need to ask yourself before searching for a business credit card.

Honest answers will help greatly in evaluating the right cards for you and allow you to filter offers that do not apply to you.

You want to find the card that has the lowest finance charges for your level of creditworthiness, offers incentives or rewards that will add value to your business expenditures, and offer statements or online account services to keep you well informed about your expenditures.

You may even want to find a small business credit card that has a credit limit that can grow with your business. Or think about getting a charge card, which has no pre-set spending limit — but you will need to pay the balance in full each month.

Finding the Right Interest Rate

You will probably find that your creditworthiness will greatly impact what card you can get for your business, and the interest rate you are charged.

Your personal and business credit scores will ultimately determine what cards for which you are qualified. Even if your credit is not the greatest, there is a card created just for you and will help establish creditworthiness. Business credit cards come in all shapes and sizes and offers!

Therefore, the better your credit situation the better your interest rate can be.

A variable interest rate is normally based on the Prime Rate of interest. From there the credit card company adds a percentage above or even below that rate. The downfall of a variable rate is that it is variable, meaning that the finance charge may vary from month to month.

Depending on the economy, the difference from month to month can be great, and if you carry a balance, it could be something you are not prepared for.

Fixed finance charges may be the better way to go if you need more consistency and do not want to take the chance of getting hit with an outrageous finance charge in the future.

The problem with a fixed interest rate is that you may think you are getting a great rate in the beginning and then the Prime Rate is lowered and you are stuck with a higher rate and unable to take advantage of the lower rate.

Avoiding Credit Card Fees

The ultimate credit card deal is the one with no fees. This means no annual fees, maintenance fees, balance transfer fees and more. Few cards do not have fees of some sort, and only the best credit will get away with low or no fees.

Introductory Promotions

Many credit cards, in fact, probably most credit card companies offer some kind of promotion for new cardholders. Some promotions are well worth the initial sign-up in combination with their standard offer.

These promotions include:

    • 0% Finance Charge for a limited amount of time
    • No Fee, No Interest Balance Transfers for a limited amount of time
    • Double or Triple Rewards for a limited time
    • Lump Points Award at account opening

Always read the promotional details well, sometimes you may be trading a higher interest rate for a limited time promotion. Or any number of other fees, such as, annual or transfer fees.


Most cards today offer some kind of rewards program. The most common are points programs. Points can be redeemed for a variety of services or merchandise.

Some programs allow you to only redeem points for merchandise through their own merchandise outlet. Some programs allow you the flexibility to choose how to redeem your points.

Other rewards may be in the form of added services, like extended guarantees, travel insurance and emergency roadside assistance.

The best reward programs however, are those that give you cash back or points in exchange for cash or gift cards like the Simply Cash Business Card from American Express. These programs give you more added value.

The trick is to be very familiar with your rewards program and know what the exchange rates are and the expiration of rewards.

Timing Payments

Many small businesses owners like to use credit cards when paying for expenses because it allows them to better match payments with revenue.

For example, many new businesses will not be given terms by suppliers. But if they pay by credit card, they can delay paying for the bill for 25 or so days after the end of the billing cycle.

This provides the business with an opportunity to make a sale – and receive revenue – to match towards payment of that expense.

And there are business credit cards out there that are designed to provide you with more flexible payment options to better take time your payment to match revenue. All without incurring interest charges.

One popular card with this feature is the Plum Card® from American Express. (Read our review.) With the Plum Card, you can carry a balance for up to 60 days after the end of your billing cycle without incurring interest charges.

Added Benefits

Many cards give you added benefits as part of their standard agreement. Some of these benefits may be especially useful to businesses and entrepreneurs.

One such benefit is an extended warranty. The card company may offer anywhere from a few extra months to doubling the manufacturer’s warranty or more. For business owners that often purchase items such as electronics, this would be a good added benefit.

Another great business incentive is emergency roadside business. If you drive your car often for business or even have a small fleet of business vehicles, emergency roadside assistance can be a great added benefit, because the unexpected can happen when you least need it to.

Other business related benefits include detailed monthly statements that track spending habits and organize everything nice and neat for taxes.

Even better is a card like The Plum Card from American Express, which actually allows you to carry a balance for 60-days interest free. Perfect for businesses that need a little extra time to match revenue with expenditures.

Once you have the answers to your preliminary questions and find the card that has the most attractive rates and useable rewards or added benefits, than you are off to a great start with your business! Just remember to keep an eye on your balances and your rewards so that you can make the most out of your business credit card.

The editorial content on this page is not provided by any of the companies mentioned and has not been reviewed, approved or otherwise endorsed by any of these entities. Opinions expressed here are the author's alone. Additionally, the opinions of the commenters are not necessarily the opinions of this site


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