Small-business owners have plenty of options when it comes to obtaining a business credit card.
While a card is a good way for a company to establish credit, a small-business owner must be aware of a number of concerns when going that route.
“Small-business owners should first understand what their needs are, what is important to them and how they plan to use the card,” said Holly Mudd, senior vice president of business credit cards, business banking at Citizens Bank, which has multiple locations in eastern Pennsylvania.
“Small-business owners should do their homework. They need to consider what card will make the most sense for their business.”
Bank officials say small businesses that want a credit card should know their spending habits, if they intend to carry a balance or pay the card off each month and if they are interested in the rewards and incentive programs that come with the card. Low interest rates, grace periods, annual fees and cash back opportunities all should be factored into one’s decision.
Mudd said that small businesses should work with a financial adviser to determine the appropriate business card for them. A financial professional can give the business a rundown of the card’s features and benefits and the pros and cons of using the card. He or she also can review and discuss the credit standing of a business.
“If business owners are looking to provide cards to their employees, it is important they find a card that provides spend controls and alerts,” Mudd said. “Business owners that make a lot of purchases online or over the phone will want to ensure their card provides virtual card numbers so that if their card number is compromised, it will not impact their plastic card.”
LOW RATES, HIGH CREDIT LIMIT
Julie Pukas, head of U.S. bank card and merchant services at TD Bank, said small businesses want a credit card that suits their financial needs.
“Small-business owners who spend often on things like office supplies, travel expenses or catering, should choose a credit card that rewards them for those purchases,” she said. “We found our small-business customers were spending a lot on internet services, dining and travel. So we reward cash back on those purchases.”
TD Bank recently surveyed small-business owners and found that top factors that influence their credit selection include low interest rates (58 percent), cash back offers (53 percent) and a high credit limit (42 percent).
Less that less than half – 46 percent – of small-business owners have a business credit card, according to the survey by New Jersey-based TD Bank, which has 28 locations in the Lehigh Valley and Bucks regions.
NO FEES ON FOREIGN TRANSACTIONS
Heidi Detweiler, a retail small-business credit sales consultant at Wells Fargo, said a small-business owner can go to the bank’s website to get details about the three main business cards it offers. The online credit card center outlines interest rates, annual fees, rewards and cash back information, credit line availability and the amount of employee cards you can get with each card.
Wells Fargo has bank locations throughout the region.
“The cards offer no fees on foreign transactions. So if a business travels to foreign countries a lot, they like that option,” Detweiler said, adding that there are different levels available based on credit history and the size of the business.
INTEGRATION WITH OTHER FINANCES
Alan Aldinger, vice president of media relations at PNC Bank, which has multiple locations in eastern Pennsylvania, said the bank offers five business credit cards that give a wide range of perks including reward points for certain purchases, cash back rewards, travel miles, low annual percentage rates for those that qualify and online reporting and spending control services.
“Four out of five PNC cards do not have an annual fee,” he said. “The PNC Bank Options Visa Signature card has a fee structure based on the annual total of net purchases. The fees can range from $0 to $500.”
He said that a small-business owner should evaluate a card to sees if it integrates with his finances, if it fits with other business banking products it uses at that bank and if the credit card has reporting tools to help the business manage its expenditures and monitor cash flow.
Hugh Connelly, president of business banking at Souderton-based Univest Bank and Trust Co., said prime interest rates through Univest range from 7.99 to 11.99 percent. Rates vary based on creditworthiness and are subject to change.
Several perks Univest offers with its business cards include rental car insurance coverage, purchase assurance, extended warranties, master assist concierge services and the ability to sync with accounting software such as Quicken.
Mudd at Citizens Bank said that the bank’s commercial credit cards offer some similar rewards and protection against fraud. She said its cards have no annual fees, no additional fees for employee cards and the billing cycle runs 30 days with an additional 20-day grace period for customers who like to pay off the balance each month.
LINE OF CREDIT
Mudd and other bank officials said that cards with longer grace periods often can have generous rewards and be more appropriate for the small business that doesn’t carry a balance. But, many times the balance is carried from month to month.
Connelly of Univest advises that small businesses determine the exact way they want to use a credit card and have a credit line for working capital and equipment purchases.
He said that he knows some business owners who use a credit card to buy equipment for their business.
Connelly cited the example of a doctor’s office. The doctor uses the card just to get rewards points and then obtains an equipment lease from Univest Capital Inc. to pay off the credit card before interest charges accrue.
“It can be a dangerous game if you miss a deadline, but it works. To me, it’s a lot of extra work to get a few frequent flyer miles,” Connelly said.
He noted that he sees too many businesses (not necessarily that doctor’s office) that get a business card for emergency purposes. They have no intention of carrying a balance, but it ends up happening, and then those businesses find themselves with high rates.
“Unless you are 110 percent certain you will never carry a balance, I would use a debit rewards card linked to a bank account with overdraft protection instead of a business credit card,” Connelly said.