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5 Questions Every Business Owner Should Answer Before Picking a Credit Card

Meredith Wood
Meredith Wood

Before committing to one card, carefully consider these five issues.

As a small business owner, you're already a pro at doing your research and weighing the pros and cons of every decision. So it's no surprise that before you chose a business credit card, there are questions you need to ask (and answer) to make sure you pick the right one for your needs.

Starting a business requires a lot of capital upfront, and whether you've been in operation for a while now or are just starting out, we don't need to tell you how important that cash flow can be. The beauty of a business credit card is not only does it help you build credit and establish your business, but it can help meet financial needs.

If the time has come for you to pick a business credit card, here are some things you should consider before committing to any one card.

1.  How will you use your credit card?

By now you've decided that you need a business credit card, but step back and consider how you'll use it day to day. If you know you'll make a lot of big purchases and will likely need to carry a balance, finding a card with a low interest rate should be a priority. Similarly, if you plan to transfer a high-interest balance to save money, a card that offers a 0 percent introductory APR rate is key. And say you plan to make a handful of small, necessary purchases and pay them off right away. A hefty cash back rewards program can be more beneficial than an interest rate or a grace period.

Evaluating what you need to buy over the next weeks and months and how you plan to use your card can help inform the best choice for you.

2. Do the rewards work for you?

If you have to buy that expensive new fridge, you may as well get a few points for it, right? As you consider which card to get, consider again how you'll use the card and whether the rewards fit your lifestyle.

Travel for a business a lot? Consider a card with the best mileage program. If you anticipate wining and dining your clients often, a card that gives you maximum points for each dollar spent in a restaurant is a great choice.  Doing a little self-assessment and planning before committing to a card can save you money in the long run.

3. What are your options if you can't make your payments?

In an ideal world, of course, your business would be flourishing right away and this question wouldn't be relevant. But life happens and even if you never need a safety net, it's good to know what your options are just in case. Find out if the card you choose has a grace period, and if so what it is.

Also look into the penalties for missed payments and whether the card offers any flexibility when it comes to payment due date or amount. Rules and policies on these types of questions will vary depending on the credit card company, so this is one area where those research skills you've honed will come in very handy.

4. Will it affect your personal credit?

Whether or not your business credit card will affect your personal credit is a gray area. Some business cards report to either consumer credit bureaus or commercial credit bureaus, and others report to both (or neither).  

Many cards require a personal guarantee from the primary cardholder (usually the business owner), and this makes it difficult to keep your personal credit completely separate from your business's. That said, if you choose a business card that does not report to the consumer credit bureaus, you may be able to limit your personal liability.

5. How does this card stack up against the competition?

Before making a final decision on a credit card, make sure you've done your research and checked out all the options. As you compare cards, lay out the pros and cons of each and consider them together. Is there one available with a lower interest rate or a smaller annual fee? Sure, the allure of that sign-on bonus is real, but will the card suit your needs after the first three months? Look at all the options in comparison to each other before you submit that application.

Finally narrowed down the best card for you?

Throughout the process of getting your business off the ground, you've had to ask yourself a lot of questions. Knowing what questions to ask and how to answer them will always be important to your success in everything from branding your business to, yes, picking a new credit card.

Image Credit: nhungboon/Shutterstock
Meredith Wood
Meredith Wood
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Meredith Wood is the Editor-in-Chief at Fundera, an online marketplace for small business loans that matches business owners with the best funding providers for their business. Prior to Fundera, Meredith was the CCO at Funding Gates. Meredith is a resident Finance Advisor on American Express OPEN Forum and an avid business writer. Her advice consistently appears on such sites as Yahoo!, Fox Business, Amex OPEN, AllBusiness, and many more. Learn more at www.fundera.com