Whether to get a small business credit card - and which one to apply for - is a matter of balancing features against interest and fees, and securing the best business credit card offer.
Credit card features and benefits
- Accounting: credit cards can consolidate business expenses into one monthly payment, it's simple to monitor expenses - via multiple cards - with monthly and online statements.
- Cash flow: if you're constantly juggling immediate expenses and uncertain payments, small business credit cards can tide you over - so long as the debt isn't only increasing.
- Credit card rewards: paying for small business expenses via credit can add up to a valuable amount of rewards - especially handy for company travel.
Credit card interest and fees
- Most business credit cards charge higher fees than personal accounts, although they're tax deductible.
- Corporate credit cards typically have higher interest rates than the best low rate personal credit cards, so you'll want to keep ongoing debt to a minimum (or look at some small business loans).
- Business credit card rewards typically involve large annual fees, so you'll want to get rewards value for fees.
Business credit card - or personal?
Many small business owners start out by using their personal credit card for business expenses. But is that the right call?
- Minimising fees (eg, annual fees) through fewer accounts
- Better interest rates
- Avoiding the pitfalls of multiple accounts - such as fees for missed payments
- Maximising rewards
- Avoiding the hassle of applications and credit checks
- Hassle of separating personal from business expenses
- Difficulty of proving business expenses to tax office
- Personal credit ratings can be damaged (if you miss payments or exceed your limit)
While it may be easier and more cost effective to use a personal credit card for business expenses when you're setting up - for ease, cheap interest rates and fewer fees - the accounting difficulties in the longer term will probably make a small business credit card desirable once you're up and running.