Popular Business Credit Card Options: Capital One vs Wells Fargo

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Small businesses continue facing hurdles when striving to access capital. As giant companies raise capital through equity markets and debt, small businesses often finance their investments with loans from few lending institutions (or personal funds).

Despite the economic rebounds, chances of commercial banking institutions lending to small businesses remain low. There are approximately 30 million small businesses in the US. They account for over 60% of new private sector jobs, according to the Small Business Committee. As such, the frequent inaccessibility of business acquisition financing and startup capital remain a major setback hindering the engines of the economy from growing.

Although entrepreneurs, small businesses and start ups turn to Small Business Administration (SBA) for assistance, most of them do not immediately qualify. Business credit cards can be a more accessible financing option for small business owners. However, it comes with responsibility. Before applying for one or using, it’s prudent to understand its features, benefits and demerits. In this article I compare the most popular business credit cards from Capital One and Wells Fargo.

Capital One vs Wells Fargo Business Credit Cards

Capital One offers the following credit cards for business:

  1. Capital One Spark Cash
  2. Capital One Spark Miles
  3. Capital One Spark Cash Select
  4. Capital One Spark Miles Select

Wells Fargo offers the following credit cards to small businesses:

  1. Wells Fargo Business Platinum Credit Card
  2. Wells Fargo Business Secured Credit Card
  3. Wells Fargo Business Elite Card

Key Features and Advantage of Capital One and Wells Fargo Business Credit Cards

Capital One Spark Select for Business

This is the most popular business cash back credit card with no annual fee and has a simple rewards program. The card earns you an unlimited 1.5% for every purchase you make.

Spark Select competes with other business credit cards such as BBVA Compass ClearSpend Prepaid Visa Card, Chase Ink Business Cash and its own Spark Cash.

Key Features

  1. Introductory APR: 0% APR on all purchases made for the first 9 months.
  2. Early Spend Bonus: If you spend $3,000 and above in the first three months, you earn $200 bonus cash.
  3. Rewards and Redemption: Every dollar spent earns you a 1.5% flat rate. You can redeem your cash back for paper checks, gift cards, charity donations and statement credits.
  4. Fees: No annual fee, fee for employee cards, balance transfer fee or foreign transaction fee.
  5. Reports: Capital One sends a comprehensive report of your expenditure or your employees’ after every quarter and year.
  6. Downloadable Purchase Records: You get purchase reports that are exportable to most accounting software like Excel, Quicken and QuickBooks.
  7. Credit Required: Although some credit imperfections may not disqualify you, this card needs good credit.

Advantages

  1. No foreign transaction fees: This is an ideal card for small business owners who travel or do business abroad.
  2. No annual fee: Suitable for business owners who don’t spend enough to settle an annual fee.
  3. Early spend bonus: Most small businesses can spend $3,000 in three months and can easily get $200 bonus.
  4. No spending restrictions: An unlimited 1.5% cash back on all purchases and there’s no rotating or tier categories.
  5. Redeemable amount: As a business owner, you don’t have to wait until you hit any threshold to redeem.

Disadvantages

1.5% reward’s rate: Although it’s a decent rate, other competing companies like Chase Ink offer higher rates. For small business owners with heavy spending needs and hoping to break through using these caps, consider other cards.

Limited business benefits: Apart from spending reports, this card doesn’t offer many benefits tailored for small business owners. Other companies offer more. For example, the American Express OPEN includes 5% discounts with chosen merchant partners like FedEx.

Non-cash redemption: Business owners have few options to redeem cash backs. It’s statement, gift card, charity or paper check. Gift card redemptions can cut cash back value. Also, their terms can change without notice.

Can’t redeem for stock: Small businesses can’t redeem their cash back for merchandise. You don’t have the flexibility to spend your cash by taking out of your account.

Wells Fargo Business Platinum Credit Card

This is a credit card designed for small and medium sized businesses. The business credit card has $0 annual fees and credit lines of approximately $50,000. In addition, the card offers useful risk and financial management tools to assist small business owners.

Key Features 

Rewards and Cash Back: As a business owner, you choose between reward points and cash back. If you choose cash back, you earn 1.5% cash back on all purchases with $500 bonus when you hit %5,000 in purchases in the first three months.  The reward option earns a dollar point per dollar spent. You also get 1,000 bonus points once you hit $1,000 in purchases within any monthly billing period.

Introductory APR: The business card has $0 APR introductory offer for the first 9 months. The offer is on balance transfers and purchases. After the intro period elapses, the APR increases to 7.99% to 17.99%.

Foreign Transaction Fee: With Wells Fargo, there’s no charges on foreign transactions making it suitable for small business owners to travel abroad or do business.

Advantages

  • Credit line of up to $50,000
  • Offers a maximum of 99 employee credit cards at no fee
  • Monitor business cash flow online
  • Manage business expenditure with business spending report
  • Fraud monitoring
  • No spending categories needed for rewards

Disadvantages 

  • Limited introductory APR: Although the card has 0% intro APR on purchases, the offer duration is only 9 months. Other competitors offer 12 months. Afterwards, the APR falls between 7.99% to 17.99% which is higher than competing cards.
  • Not suitable if you spend less than $1,000 in every billing period.
  • Inappropriate if you purchase common bonus categories.

Capital One vs Wells Fargo: How Business Credit Cards Benefit Small Businesses

Apart from providing the needed capital, credit cards can benefit your business in the following ways:

Easy Qualification: Small business owners with no prior established credit history can qualify for a line of credit with a credit card as compared to traditional bank loans.

Convenience: Business credit cards provide financial convenience. Entrepreneurs can access finances for purchases than using a checkbook.

Financial Cushion: When account receivables are low, a credit card offers the much-needed financial assistance or cushion.

Bookkeeping Assistance: Most cards offer online bookkeeping tools to assist business owners manage their accounts.

Build Credit: Credit cards can build your credit report positively when used responsibly. That puts you in a better position to qualify for loan at low interest rates in future.

Capital One vs Wells Fargo: Demerits of Business Credit Cards to Small Business Owners

Personal liability: Majority of business credit cards need personal liability contract to repay debt. That means even if you move abroad with credit card debt, pay late or fail to pay, it adversely affects your credit report.

Security Issues: It’s prudent to ensure employees don’t use business credit cards for personal use. They should also be cautious when transacting online to avoid getting hacked.

Expensive: Although cards offer convenience, they are more expensive in the long run when compared to conventional loans.

For business credit cards to benefit small businesses, good habits and policies must be in place from the beginning. Credit cards are not designed to be penal, they just need good practice. Before choosing one, research deeply and consult wisely. Speak with a financial expert to help you choose what’s suitable for your business.