With the growing number of business credit cards out there, savvy company owners have a vast selection from which to choose. But like personal credit cards, there are a number of things to consider before you sign on the dotted line.
If you pay off balances each month, then a charge card may be a good choice – especially if you’d like to add discipline to your spending habits. Charge cards must be paid in full within 30 days or penalties may be incurred. Credit cards, on the other hand, enable you to carry a balance. But that can cost you in interest payments.
HOW DO YOU RATE?
Interest rates are another consideration – especially if you plan to carry a balance. Pay attention to the fine print. Introductory rates may sound good, but they can soon balloon. If all seems well, 0% offers can be a good deal, especially if you have existing balances you’d like to consolidate. And it’s usually 12 to 18 months before the permanent rate kicks in.
READY TO REAP REWARDS?
Rewards abound, but it pays to do a little research and apply for a card with rewards that match your spending habits. There are cards that provide cash back for most expenditures you’ll make for your business, so do your homework – it can really pay. A good place to start: nerdwallet.com.
NOT TOO MUCH CREDIT
The decision to use a business credit card shouldn’t be taken lightly. Interest can add up quickly if balances linger. Remember, too, to look at your complete debt structure for your business (e.g., loans, credit cards, etc.). Your advisor can help create a complete balance sheet for your business that includes your assets and liabilities, including credit card debt, and help you create a plan to manage it.
FEE OR FREE?
Annual fees add up. On the other hand, they may be a small price to pay if you have a card that delivers rewards and benefits worth more than the fee. Sometimes a card with an annual fee, for example, offers longer grace periods for members to pay off balances without incurring interest. Or you may be willing to pay a fee for a card with a lower interest rate.
Credit cards can offer a lot of benefits and can help a small business access what it needs to grow, without tapping into your personal resources. Just be aware that some will ask you to personally guarantee payments. If you keep these things in mind, you can find a business credit card that will be a powerful tool for managing purchases and your budget.
Material created by Raymond James for use by its advisors. The information contained herein has been obtained from sources considered reliable, but we do not guarantee that the foregoing material is accurate or complete. Raymond James is not affiliated with any other entity listed herein.