Credit cards are used by many small businesses as a way to pay for overhead, equipment, supplies, and other necessary expenses. A good business credit card would be one that a new, small business owner can qualify for that does not use unscrupulous practices and offers good rewards for the user.
Find good credit cards for a new small business by using the FREE credit card finder right now!
Even though business credit cards are used for the expenses of a business, they are still usually given out based on the business owner’s personal credit. Despite this, small business credit cards are not covered by the protections put in place by recent legislation.
Qualifying for a Small Business Credit Card
According to the National Small Business Association, a small business owner’s personal credit is usually used to qualify the business for a small business credit card. The application process for a small business credit card is similar to an individual’s process. Lack of payment on a business credit card will also negatively affect a small business owner’s credit history and score as well.
Protections Consumer Credit Cards Have that Business Credit Cards Don’t
The Credit Card Accountability, Responsibility and Disclosure Act of 2009 created rules and regulations aimed at protecting consumers from unscrupulous and deceptive practices by credit card companies. Business credit cards were not covered under this legislation, and though the responsibility for repayment ultimately rests with the small business owner, according to SmartMoney.com, owners have no protections from unfair practices from credit card companies. Unlike consumer credit cards, business credit cards are subject to:
- Interest rate increases for no apparent reason
- Payments purposely applied to lower-interest balances so that higher-interest balances will continue to grow
- Fee Traps. Credit card companies can change or adjust due dates and times in an effort to try to trap users into paying late fees.
- No limits on the fees a credit card company can charge
- Confusing language and hidden terms and conditions in an effort to withhold information from the user
- Little regulation of credit card companies for unfair practices
SmartMoney.com does add that both Bank of America and Capitol One have made efforts to extend consumer protections to their business credit cards. Hopefully, such a move indicates that banks and companies are trying to operate in a more user-friendly manner going forward, or that, more realistically, business credit card protections will follow those of the Credit CARD Act.
Any credit card that purposely uses deception and lack of information to milk profits from small business owners can never be labeled as good.
Fair Interest Rate for a Small Business Credit Card
Business credit cards generally have a higher interest rate than consumer credit cards, according to the Federal Reserve. The average annual interest rate for consumers in late 2011 was 12.36%, but business credit cards average around 15%. So for every $100 spent, a small business can expect to pay at least $15 in interest, not to mention any other fees.
A fair interest rate for a credit card is one that is close to consumer rates, taking into account the owner’s credit score. Credit card companies can raise the interest rates of a business credit card to usurious levels without any warning. Any business owner who experiences an interest rate hike for no reason should be searching for a new credit card company. The good credit card companies are the ones that keep their interest rates for business credit cards at a fair market level.
Rewards Offered by Business Credit Cards
While business credit cards have fewer protections that consumer cards, they certainly have a reputation for having more rewards programs. Rewards are one persuasive technique that credit card companies use to increase users’ balances.
More purchases equal more rewards, so users are likely to spend more with the card.
Small businesses can get cash back, airline miles, and other perks with their business credit cards. While a good small business credit card will offer a company rewards on credit card purchases, a bad one will offer rewards in the hopes of catching the small business owner with a higher balance when the interest rates are increased.
Find the Best Credit Cards for a New Small Business
Small business owners who are looking for a credit card should first make sure that their credit score is high enough to get the best rates available. Next, they should research and compare credit cards to find the best interest rates. Furthermore, every small business owner should examine the monthly credit card statement with a fine-tooth comb and replace any credit card company that uses unfair and unscrupulous practices.
- Where can companies find the best business credit card rates?
- First Interstate Bank MasterCard Business ScoreCard Credit Card
- CitiBusiness Card
- Should You Get a Business Card or a Consumer Card?
- Where can I compare business credit cards?
- Where do I find business credit cards for new businesses?
- Do I need a new small business credit card?