Best 5 Small Business Credit Cards in 2020
Starting your own business might be a scary decision to make, but certainly, it can also be one of the most rewarding experiences you will ever face and enjoy in your life. If you are currently in the process of embarking in the journey of becoming an entrepreneur and a business person, it is key for you to be aware that at some point you might have to apply for credit in order to sustain or expand your business.
Just like any individual has to face a credit score to determine their creditworthiness, the same applies to companies and private businesses. If you are a small company or a startup, it is highly probable that you will have to start building a credit score and history to back your firm. One of the most common paths utilized to build business credit is by getting a credit card.
Even though this is a pretty common practice to create a credit history, it is key to keep in mind that credit cards can also become a big problem if not managed accordingly. While interest rates on business cards are considerably lower than traditional cards, it is still high compared to other borrowing products like credit lines and loans. if you are planning on financing through your credit card you might want to rethink twice as it could easily cost you 3 times as much as other products.
The idea behind this article is to provide insight into how a business credit card works and also the best cards available in the market. It is important for you to take your time to understand what your business needs are in order to choose the best card for your company.
What is a Business Credit Card?
A business credit card is designed with the intention of being used by a company or a business instead of the personal use of an individual. This type of card can be pretty useful for small companies who are trying to build up a credit record and also to consolidate their spending in an effort to minimize it but also to record it better.
One common misconception is that a company should be huge or have many employees for it to be eligible for credit cards, in reality, it is simpler and more accessible than that. Over the years the demand for this type of product has become so high that many financial institutions started to look for ways to open credit lines for startups and companies without a business record. One particular structure that has become very popular is for individuals to act as personal guarantees for the business credit cards, this model would allow for the integration of personal liability in order to back the structuring and the debt.
Just like with a traditional credit card, mishandling can lead to expensive problems that can easily damage someone’s credit score, and put any new company in a precarious situation.
Here are some of the most important pros and cons of business credit cards.
It is worth mentioning that these are not standard terms and they can vary between financial institution and even card membership.
Best Business Credit Cards
1. Chase Business Preferred – Visa | Overall Best Signing Bonus
Over the past years, Chase Bank has been trying really hard to take the throne of AMEX as a symbol of status and wealth. Their Preferred program was developed with the sole intention of matching and improving the benefits that an individual would receive with most American Express Cards. Even though it is a tough fight I’ve found that they both fall into different categories once you look at the micro details.
This is a card that it is for someone interested in a premium service, at an accessible price and with a great sign in bonus. It can not be compared in terms of the luxury benefits of an Amex Platinum but when it comes to the real deal of using your credit card, it is truly a close fight.
Many people believe this card charges a considerably expensive annual fee but once you consider that your signing bonus is worth more than $1,000 then you realize that you are actually getting money from owning the credit card. Not many firms can say that individuals will actually be the winners out of having a credit card.
APR: Variable 18.24%-23.24%
Intro APR 0% (not offered)
Credit Card Type: Unsecured
Minimum Credit Score: 740+
Annual Fee: $95
- Points: This card offers 80,000 bonus points simply by signing in. If your business will require you or someone in the firm to travel a lot you should consider this as a great option since the bank offers 3 points for each dollar spent on travel.
- Airline Transfer: Something very clever that chase did with their credit cards is to offer their users to transfer their points towards miles of more than 50 airlines around the world. This is a great benefit as it provides a more transparent payment process when it comes to withdrawing and utilizing the points/miles.
- Customer Service: Keep in mind that you are doing business with one of the largest and most important banks in the US, this allows Chase to offer a more personal and caring service, think about it as an economy of scale.
- No Intro APR: One of the most peculiar benefits of business cards is that they usually offered a considerably longer period of time where the interest on card balance is reduced or waived entirely. As a business owner, this can be an easy way to fund certain expenses and purchases during a short period of time.
- High Annual Fee: This is a very common practice but it is still a hefty sum to pay for a regular Visa Preferred Card. Keep in mind that this is an expense that will automatically be charged to your credit card. If for some reason you are not planning on using your card much often you should not forget to pay for this initial charge. It would be a pity to forget about it and get a penalty so early.
2. Capital One – Spark Cash | Overall Best Office Expenditure
Some times in life it is better to aim for something that it is simple and minimalistic than going for the flashy option, while many individuals still prefer a posh looking credit card, there are others truly interested in getting a good service and a product that is easy to understand.
If you fall into the latter category then you are in a good time as this might be the best business credit card that you will find in the market. This is a credit card that is very straightforward and easy to understand, Capital One has made an incredible job making this a product that is crystal clear. If you’ve had bad experiences with the fine print in a credit card contract in the past, you might want to look at the Spark Cash card as your next CC.
APR: Variable 19.24%
Intro APR 0% (not offered)
Credit Card Type: Unsecured
Minimum Credit Score: 700+
Annual Fee: $95 (Waived for the first year)
- Signing Fee: Even though $95 a year is a considerably high fee for a credit card, it is amazing to get a free year of their service free of cost. Based on the official statement of Capital One, the idea behind waiving the first year is to allow individuals to try out their platform and their cards without a cost in between. The company is very confident in that after the first year you will decide to stay as the benefits of the card pays in excess of the cost of ownership.
- Zero% Fraud Liability: With so many credit cards in the street criminality and fraud cases have become more common in the US. If you are planning on actively using your card online, it might be a great idea to go for a card that will cover 100% of the cost of fraud associated with your card. Even though this is a new Benefit that many card issuers are starting to look into, it is still great to see an option already offering it. There is nothing better than knowing you are covered in case something happens and a criminal try to use your credit card, or simply if they copy your card information and start using it.
- Rental Car Insurance: While we complain about this card not being at the level of a fully dedicated traveling card, is worth mentioning that the firm offers a full liability coverage insurance for any car rental paid with your card. This is something rarely seen in cards of this category.
- Rewards: If you are thinking about choosing SparkCash for their rewards you might want to reconsider your decision. Even though the firm offers a very competitive reward program with high bonuses, the points are only valid through their platform which makes it a little bit uninteresting. Not being able to transfer or use the miles with other airlines or packages has become a very standard practice in the market and it seems like Capital One hasn’t adapted yet.
- Traveling: This is a credit card that is not designed for traveling purposes if you are planning on traveling as part of your business plan you might want to aim for a fully dedicated card.
3. American Express Business – Platinum | Luxury, and Status
Over the years American Express has become an important symbol of wealth, status and even a piece of true historical Americana still standing. If you need a credit card you don’t get an AMEX because you need one but because you want one. The platinum cards have become more of a status symbol than a financial instrument over the years.
If you meet the Minimum cash requirements to apply for this card it is important for you to understand this piece of metal (yes… metal) will open doors for you and your business. One of the most important benefits of this card is their concierge service and how well they perform when it comes to traveling.
It is important to mention that this is a ChargeCard which means that you are supposed to pay back in full your balance every month. Financing is available but it will have to be requested manually in case you are interested, keep in mind that nothing in this card is cheap and interest rates won’t be either.
Credit Card Type: Charge Card (Balance must be paid in full every month)
Minimum Credit Score: Excellent 740+
Annual Fee: $595
- Membership Rewards: This is probably where AMEX excels the most and it is that the firm offers one of the very best reward programs. The overall model is so open that your AMEX points are almost as good as cash since you can use them for almost anything. For instance, if you use your points to buy a plane ticket, 30% of the spent miles will be assigned back to you as a cashback transaction.
- Fee Credit: The company offers up to $500 in free airfare tickets a year, this credit can be utilized for both local and international flights and they can be combined with cash or points.
- Concierge: This is not your regular guy standing behind a desk in a hotel lobby, it is a full service 24/7 365 days a year where you will be offered with a service that can be compared to having a personal assistant. Picture yourself in a foreign city needing a reservation for a restaurant, buying a gift for your son or even sending flowers to your loved ones, these are just some of the perks of their service.
Being objective this credit card is the crown jewel only bellow the AMEX Centurion reserved for the 1% of the 1%. It is a fantastic product if you have the means to get it, as mentioned before this card will open you and your business many different doors that otherwise would not be at your reach.
- Annual Fee: This is probably a deal breaker for most individuals, it is very difficult to justify from a business perspective to spend almost $600 a year on a credit card subscription. If your business requires you to travel vastly, you might be able to tell yourself that you are getting it for the lounge benefits and more but in reality, you know you want the status…!
4. Simply Cash – AMEX | Overall Best Business Credit Card
AMEX by itself is a symbol of wealth and status, this might not be as posh and luxury as the Platinum card but it is an even better deal if you really are interested in a proper business oriented credit card.
The whole idea of this card is to help small business operators to make the most out of every penny they spent, it is important to keep mind that this is probably one of the very best cards in the market if you are focused on cost efficiency. Not only you will not have to deal with an expensive annual fee but you will be getting one of the best cash back programs in the entire market. Not every credit card provider can give you an automatic cashback of up to 5% on all your purchases.
Another point where this credit card truly stands out is in its flexibility, not only you are getting a reasonable APR but for the first nine months of your service, you will be able to get zero interest rate. Keep in mind that we mentioned this as it can be beneficial for small companies to actually grow without having to pay interest on their borrowing during this period of time, and not to promote getting in debt.
If you are planning on giving trustful employees a credit card to act on behalf of the company, this might be your overall best option in the market since AMEX will not charge you anything for additional credit cards.
APR: Variable 14.49% – 21.49%
Intro APR 0% (9 months)
Credit Card Type: Unsecured
Minimum Credit Score: 700+
Annual Fee: $0.
- No Annual Fee: In a new business every penny counts, being able to save between $100 and $600 a year per credit card represents a considerably large saving over time.
- Intro APR: Not having to worry about paying interest for nine months is probably one of the main reasons why so many individuals prefer this card over other competitors like Chase Preferred. This proves how much the company is interested in seen small businesses flourish. At the end of the end, it is in their best interest to see your business growing.
- Points Rewards: The overall model is more complicated than it is with the platinum card, you also won’t be able to use your points as freely. Keep in mind that this might not be a deal breaker for some individuals but it is worth noticing.
- CashBack: If you are a big spender and you are planning on using your card for more than $50,000 in a year you might want to look somewhere else. The problem with this card is that after you’ve passed the threshold of 50K, your cashback will fall to less than 1%.
5. Citi Business – AA | Overall Best for Local Travellers in the US
Citibank core business over the past decade has been corporate banking. The whole idea of offering this type of products is to start building a relationship with companies with high potential and that have high chances of becoming a bigger client in the future.
The bank offers a very straightforward product, easy to use and to understand. It is important to mention that this is a credit card that works great for someone who is doing business in the US and has to travel a lot locally. While American Airlines do offer access to miles and benefits for international traveling, you should keep in mind that it is in the local traveling where you can make the most out of this credit card.
If you spend more than $3,000 on your first 3 months of service you will get 50,000 bonus miles with the American Airlines Advantage Program, and the same will happen every year you renew your membership. Pros and Cons about Citi Business - AA
APR: Variable 17.99% – 25.99%
Intro APR 0% (not offered)
Credit Card Type: Unsecured Minimum
Credit Score: 700+
Annual Fee: $99 (Waived for the first year)
- Annual Fee: keep in mind that even though having to spend $100 a year on membership is definitely not the ideal, the miles you get awarded represent already a profit for you.
- AA Advantage Status: This credit card comes in both black, platinum and traditional layouts. The first two models will get you a premium status with the airline, this will help you get a better experience and also to be eligible for upgrades and more.
- Intro APR: If only this card would offer an introductory interest rate it would be even better than most business credit cards in the market. Keep in mind that even though it is categorized as a business card, the only thing that truly resembles the traditional business model is mid to low interest rates.
From a management perspective getting a credit card might be one of the best decisions you can make in order to save time and also to improve the control over your finances. Disregarding your industry it will be key to always remember the risks and the problematics associated with utilizing a credit card in your company. Keep in mind that the real problem is not the credit card, but the individual using it without a tight leash or a stablished control.
Even if you think that it might help you cover unexpected expenses and that it can solve certain financial situations, it is important to always remember that this is a scheme where you enjoy know but you will have to pay it later. Credit Card APRs are incredibly high which makes financing super expensive.
Running a business is already stressful enough for you to allocate part of your mental focus thinking about credit card debt so early in your business life.
It would not be fair if I simply focus only on talking about all the problems without bringing to the table all the benefits that a credit card could bring if managed appropriately. It is your responsibility to remain on the right track, making sure to always pay. If possible aim to automatize payments, that way you will not put yourself in a position of having to deal with high fees and penalties.
As mentioned always, take your time to review all your different options before making a final decision. There are literally hundreds of options in the market to choose from, with the proper investigation and review it is very likely that you will be able to find the very best option that will meet all your expectations.
Glossary of Loan Terms
What are the requirements to get a Business Credit Card ?There is not a standard set of parameters or requirements needed in order to apply for a business credit card, it is important to remember that it will vary depending on the financial institution and even the state from where you are applying. Some of the most basic things that are requested by almost all financial institutions are that the company would require to have a personal guarantee to back the card and its debt. As you can imagine, the limit of the card will be also based on the existing credit score of the personal guarantee, this creates another barrier for individuals with problematic credit history. There are other options like Secured Business Credit Cards, these can be obtained by individuals with bad credit score Other requirements are: Business Legal Name (C-Corp, S-Corp, LLC, LP) Contact Information for the Business Industry Type Financial Statements Federal Tax ID
Can Startups qualify for a Business Credit Card ?Many financial institutions offer specific credit cards for startups, while the overall structure for the card follows the typical business or corporate model, the credit score utilized for the application will be one of the business owners. Keep in mind that this is not the norm in terms of business cards and that not many financial institutions actually feel comfortable lending to startups. If you have a decent credit score you might want to look for this type of credit card as it will offer even better interest rates and benefits than your traditional and personal credit card. Startup cards usually have one of the lowest APR in the market, making very appealing.
Can I get a Credit Line through my Credit Card ?It is not 100% certain that you will be able to get a credit line through your credit card, having said so it is one of the most common paths followed by new business owners. If you are starting a company it is very likely that you won't have the required credit history as a company to apply for most common borrowing products at a bank. By getting a credit card you can start paving the road towards more complex products. The idea behind doing this is to improve and build your credit score with the intention of gaining access to other products and services in the future.
Should I spread expenses and charges over different cards or max one ?This is a fairly common question and also a complicated one to answer. In reality, doing both things will result in denting your credit score. The reason for this is that having many credit cards with outstanding balances will raise red flags but at the same time maxing one out will put you in a precarious position against the credit bureaus. From a credit score perspective the worst you can do is to max a credit score, to put into perspective it is never recommended to exceed the usage of a card in more than 30% at any given time. This is considered to be the rule of thumb on how to get the max out of a card without getting into territory that would otherwise affect your credit score.
What is the best way to build Business Credit?Since applying for a business credit card is so straightforward and easy, it makes it the go-to option for business owners interested in building credit for their company. There are other ways like acquiring services that report to credit bureaus like utilities (internet, gas, insurance), if possible you can aim to utilize providers that will report to credit agencies in an effort to provide more data to your history. Keep in mind that due to all the different facets of a credit card, it offers a great and detailed view of how the individual behaves in terms of spending. If you have the means and also the self-control in terms of taking proper care of a credit card and its repayment, it might be the best possible option to build credit out there. Don't forget that credit agencies want to see how you behave, having a credit card and never utilizing it will not make the cut. Take small steps utilizing it, as time goes and you feel more comfortable with the management you will be able to spend more with the card without breaking your own barriers. This might be a basic fact about credit cards, but it is key to remember that you should never spend money you are not fully certain of being able to repay in full within the same billing cycle. Financing with a card is expensive, avoid it at all cost if possible.