What are Business Credit Cards?

Using business credit cards makes good sense for several reasons. First, a monthly credit card statement provides an itemized listing of all business purchases, so it’s easy to keep track of expenses. Second, many credit cards offer rewards or give cash back for a percentage of all purchases made with the card. Some cards even allow a company to earn frequent flyer miles. Third, many credit card companies offer generous credit lines that companies can use to grow their businesses.

Why are Business Credit Cards important?

Business credit cards are important because they allow businesses to make purchases easily, build a credit score, purchase items even when cash is not available to the business, easily manage finances through a credit card statement tracking system, and help the company out of an emergency if extra money is needed.

How should a vendor for Business Credit Card be selected?

It is important to shop around when selecting the right vendor for your business credit card. Each credit card company will offer a wide range of benefits, interest rates, fees, cash back options, and more.

First, ask yourself how the business will use the credit card. If you think that the business will be able to pay for the credit card in full each month, then you may not need to worry as much about interest rate fees or penalties for unpaid balances. However, if you plan to pay your credit card off as funds arrive, you will want to make sure that you find a lower interest rate for the outstanding balance on the card.

Next are rewards, such as airline miles and cash back options that may be important to you. If they are, then you may want to look for a business credit card that offers a generous rewards program, such as two percent cash back on all purchases or frequent flyer miles.

Will you be using your credit card for cash advances when you need to take out a fast loan? If so, then make sure you find a credit card that allows you to take out these cash advances in the first place. Find out about higher interest rate percentages or fees for these cash advances as well

Finally, what are the fees associated with these credit cards? Is there an annual fee? If so, what is it? Can it be waived for the first year? Make sure that you understand "hidden" costs that you may be required to pay.

When looking for a credit card vendor, it is important to take the following considerations into account:

• APR - Annual percentage rate for charges to the card. Keep in mind that one credit card may have several different types of APRs on it, including a separate APR for purchases on the card, cash advances, and balance transfers. In addition, many credit cards have tiered APRs based on the size of the balance. Late payments could have a higher APR than timely payments. Many credit card companies have introductory APRs, which are usually smaller than the long-term APR, so be sure that you keep this introductory offer in mind when making payments.

• Length of Grace Period - This is the amount of time that you will have to pay off the balance of your credit card before you get charged an interest rate on that balance.

• Annual Fees and Finance Charges – These are costs to have the credit card.

• Cash Back and Rewards - The percentage of cash back or reward opportunities available to clients.

• Flexible Payment Options - Allows you to pay the balance in full each month or over time.

• Number of Additional Cards – Do you need additional cards for your employees? This is an important factor if you have multiple employees that require the same card.

• Reporting System - How purchases are reported to the business, including monthly and annual statements.

• Additional Fees - These may include a cash advance fee, balance-transfer fee, late-payment fee, over-the-credit limit fee, set-up fee, return-item fee and more. Make sure you understand each of these fees before signing a credit card contract so that you will not be surprised when the fees arrive on your bill.

Additional Resources:

• Federal Reserve Bank Educational Tool to help you choose the right credit card:

http://www.federalreserve.gov/Pubs/shop