Getting a credit card account can sometimes be much easier for a new business then securing a line of credit from a bank. This is also a good way for a small business to establish credit in their name.
There are so many choices out there that you must consider a few things first.
• Your spending habits
• What is the annual percentage rate
• Will you be paying off charges each month or paying them off over time
• Is it a fixed rate or will it go up after the first year
Charge cards can be helpful to a company that needs credit for a short period of time. It forces them to exhibit financial discipline . If they do not pay the balance within 30 days then penalties may occur. However , credit cards provide complete flexibility to the small business owner. This flexibility can get expensive though if you do not pay the balance in full and have to pay interest rates.
Many credit card companies offer rewards . If your business requires you to travel extensively then you may want a card that rewards with frequent airline miles. Cash back rewards are also a great incentive for choosing a card. Many companies offer anywhere from 1%-5% back on purchases. Some cards will earn you discounts at local retailers, restaurants ,or hotel upgrades etc. just for using their card.
Some cards charge an annual fee. This may be worth it to you if they offer a certain reward that will be beneficial to your business. You can also get a longer grace period if you opt for an annual fee, 30 days instead of the 20 day grace period with other cards. If you will be carrying a balance then you might want to opt for a card that has a lower rate instead of a card that has no annual fee.
Always make sure that you understand what will happen if you can not pay the bill in full each month and have to carry a balance on the card. If you don’t pay on time you could face steep penalties and even higher interest rates . This could even effect your own personal credit score. So make sure to put a lot of research and time into choosing the right card to suit your small business needs. You must evaluate your companies spending needs and choose a card that will suit those needs with the rewards that will benefit your company the most.
