What to Look for in a Business Credit Card

What Sort Of Businesses Should Opt For Business Credit Cards
March 18, 2014
Why A Credit Line Is Better Than Cash For Financing A Small Business
March 20, 2014

It’s becoming essential and easier for startup firms to apply for a business credit card. Requirements for obtaining a loan for startup are becoming stricter, and with the variety of business credit cards available, it is all the more difficult to choose the right credit card for your business.

You need financing, and who wouldn’t mind being offered rewards for purchases or travel? This is what business credit cards are offering to small business owners. Precisely, for this reason following are three important points to note when going to apply for a credit card for your business, which will aid in making your decision easier:

 

Interest Rates and Fees

Carefully evaluate the interest rate and fees of various cards when you head out to make your final choice. Interest rates can climb up, too fast too quickly, so you need to make sure you can compensate for that. There are late fees also applicable and various others, but make sure you don’t fall for that and make timely payments. An annual fee is a yearly one-time fee and many cards out there are offered without one. But, you should make that other rates of such cards are in line with your requirements.

 

Align Rewards with Business Expenses

When you are looking for a credit card for your business, you will find numerous cards with differing rewards programs. Don’t get intimated by the variety of options available. All you have to do is evaluate the best option for your business plan. Reward programs can offer miles for travel and other travelling perks or rewards for business purchases. If your business requires a lot of travel you may want to choose a card which pays off for travelling. Consequently, if you don’t have to travel then a card which offers rewards for business purchases is the best choice.

 

Card Act Protection

Look for a card that offers CardAct protection. It is usually offered on personal credit cards but many business credit cards also have the option. Although, there is limited option for business cards which provide CardAct protection, but if you choose a credit card which does, it will protect you against uninformed interest rate spike and unfair card fees. The act protects against fraudulent and deceptive card schemes and makes it easier for owners to understand the credit card terms.

If you have a good personal credit score, it may be easier for you to acquire a credit card for your business. It will facilitate your business operations and help steer your start-up boat through tough rides. The reward programs are solid which are offered on these cards. The first place you should consider going to for applying for your credit card is the bank where you have your personal credit card account. If you have a positive credit rating for your personal account it will add positive value towards acquiring your business card. You also need to make sure that once you hop on the bandwagon of business credit cards; you must maintain your business credit score and make timely payments to maintain a good credit score.

 

What Should You Know About Business Credit Card Scores?

As a business owner you should be aware of the commercial credit score also known as the business credit score. This is different from your personal credit score and every business credit card holder should understand how it impacts their business. There are five important points to consider about how business credit scores affect your business, these are:

 

Prediction of Late Payments

A business credit score reflects the likelihood of late payments by the business. By reviewing the credit score history, a number is calculated which reflects the risk associated to the company. It is similar to the personal credit score used to assess risk, connected to borrower’s payments, but this is targeted to a business. A high credit score reflects good payment history and makes a good to excellent ratio to obtain credit. There is no dominant credit score when it comes to business credit scores. There are two to three leading score issuers, like the firm Dun & Bradstreet, Equifax and Experian.

 

Aiding Business Relationships

A business credit score is not only used by commercial banks. It is an important number which is considered by anyone who extends credit or engages in business with the company. Financial institutions like insurance companies, card issuers and leasing companies widely use these scores to assess a business’s payments ability. But, manufactures, wholesalers and other business firms also make use of this score to study the possibility of inherent risk when extending goods or services on credit.

 

Scores May Vary

Business credit card holders must be aware that their credit score may vary from one company to the other, as they use slightly different methods to calculate it. These scores are calculated by reviewing different types of data, like the payment history, amounts owed, length of credit history, new credit and types of credit. All these factors contribute towards calculating your credit score.

 

Scores are Improved by Good Practices

Making fast and timely payments is the number one factor that affects and improves commercial credit score. Other practices which help in building a good score, are avoiding legal trouble and bankruptcy. A business should always avoid getting into any trouble regarding their credit and ensure they maintain a good relationship with their bank and other financial institutions. Businesses should view their quarterly or half yearly reports and identify any discrepancies. If you find any errors, you must report them to the creditors, and it is advisable to review your report 3 months prior to applying for credit.

 

Personal Credit Score May Affect Business Credit Score

Often creditors consider a business owners personal score when they apply for a business credit card. This could affect your likelihood of obtaining a credit card for your business either positively or negatively. In cases where a business is not established and has just started, a personal credit score may be considered. But, if an established business applies for a credit card then only their business payment history and other factors may be considered. It is noteworthy that when considered the other way around, a business credit score cannot affect or hurt your personal credit score.

 

photo credit