Opening a credit card account for your small business can be a really good move. You can take advantage of perks like getting to keep your personal and business spending separated (a big help at tax time), establishing good credit for your business, and having a new way to manage your cash flow.
But it’s not all sunshine and roses with business credit cards — some of them charge fees that are worth your consideration before applying for the card in question. Let’s take a closer look at a few fees your credit card might charge — and how to avoid them.
Foreign transaction fees
If you ever use your credit card in other countries, or even use it to pay suppliers overseas, here’s one to watch out for. Foreign transaction fees are charged to cover the cost of processing payments using banks in other countries, and they often amount to around 3% of the transaction amount.
Business Credit Card Comparison
Consider these business credit cards that offer a convenient and efficient way to separate personal and business expenses, simplifying accounting and tax reporting.
Additionally, business cards can provide valuable perks such as rewards points, cashback, and expense tracking tools, enhancing financial management and the potential to help save money in the long run.
Ink Business Unlimited® Credit Card |
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Earn $750 bonus cash back Earn $750 bonus cash back after you spend $6,000 on purchases in the first 3 months from account opening. |
Earn unlimited 1.5% cash back on every purchase Earn unlimited 1.5% cash back on every purchase made for your business |
Purchases: 0% Intro APR on Purchases, 12 months Balance Transfers: N/A
Regular: |
Ink Business Preferred® Credit Card |
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Earn 100,000 bonus points Earn 100,000 bonus points after you spend $8,000 on purchases in the first 3 months from account opening. |
Earn 3 points per $1 in select business categories Earn 3 points per $1 on the first $150,000 spent in combined purchases on travel, shipping purchases, Internet, cable and phone services, advertising purchases made with social media sites and search engines each account anniversary year. Earn 1 point per $1 on all other purchases-with no limit to the amount you can earn. |
Purchases: N/A Balance Transfers: N/A
Regular: |
Paying an additional 3% to your credit card company on top of what you’ve charged has the potential to make your business expenses more costly, so this is definitely a fee best avoided. If you do business with clients or companies in other countries, make sure you select a card that doesn’t charge for that.
Late fees and penalty APRs
Just like personal credit cards, business credit cards have the potential to cost you a lot of money if you don’t keep up with payments (and ideally, pay off your entire balance every month). Some cards even require payment in full, and if you carry a balance, you’ll be charged a late fee as a percentage of it.
Others will charge a penalty APR if you pay late, and since the going rate on a credit card averages more than 20%, a penalty APR can come in closer to 30%. If there’s any chance that you’ll be carrying a balance from month to month, investigate the go-to and penalty APRs for any card you’re considering — and avoid cards that are designated as “pay in full.”
Annual fees
Finally, you don’t want to ignore an annual fee on any business credit card you’re considering. In some cases, paying an annual fee for a credit card (be it business or personal) can make sense. Cards with an annual fee usually pay a higher percentage of cash back or rewards on your spending — and they also often come with more valuable welcome bonuses and other useful fringe benefits, like purchase protection or cellphone insurance.
If you’re just getting your business off the ground, however, it might be a good idea to stick with no annual fee cards, at least to start with. The Motley Fool’s Ascent’s list of the best business credit cards features a few with no annual fee, and these still offer decent rewards rates (like 1.5% cash back across the board) and bonus categories that might be really useful for you, like office supply stores and internet service.
Is your business eligible for a credit card?
If you’re a sole proprietor like I am (freelance writer and editor, party of one), you might assume that you’re not allowed to open a business credit card. You’d be wrong, though! Even if your business consists of evening and weekend gig work (like driving for Uber) alongside a full-time W-2 job, you have access to these cards.
You can qualify using your own Social Security number — and just like with personal credit cards, the better shape you’re in financially, the better your odds of approval for a great card. Just take the time to assess all the fees you could be subject to if you get a business credit card — some of them have the potential to make using the card a lot more expensive.
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