Many businesses do not know where to start when it comes to selecting a business credit card.

So many alternatives exist today, and the thought of researching options can seem daunting.

Some business owners simply utilize personal credit cards for business expenses and reimburse employees. What they may not foresee, is that having to separate expenses for taxes later in the year can become quite challenging.

Having the right business credit card(s) can help simplify payments and add accountability to employees. Many of these cards also offer protection for businesses specific to fraud that can occur within a business versus consumer transaction.

The first thing business owners should do is make sure they understand the basics of business credit cards before selecting the right type, which may be more than one depending on usage in various parts of the company.

1. Understand how business credit cards work

Before applying for a card, ask questions to better understand key features.

• Charge vs. Credit vs. Debit card. A charge card has no predetermined spending limit and the balance should be paid in full each month. This doesn’t typically mean unlimited spending, and specific terms should be confirmed with the particular provider. Meanwhile, a credit card has a set limit, but allows a balance to be carried each month with interest. A debit card is not a credit or charge card. It is a card linked to a business transactional account that is backed by the funds held there.
• Liability. Depending on the card, the company may have liability or the business owner may be personally accountable for any charges made to the account, whether the owner or employee made the purchase.
• Understand protections. Most business credit cards come with fraud protection, and you should be able to call the provider directly to dispute charges. The credit card company will in most cases investigate suspicious activity as part of their duties. However, these protections are not the same as consumer cards, which are protected under the CARD Act. Consumers typically have longer grace periods as card companies expect businesses to be savvier when it comes to payments. Make sure to pay on time and understand how fraud is handled should an attempt occur.
• Employee use. From one employee to dozens using a credit account, business credit cards offer some of the biggest advantages when it comes to tracking spending and reimbursing employees. Multiple options exist today to integrate with accounting software as well. Today, most cards allow employees to be added at no additional cost.

2. Review your business’s spending habits

• Pinpoint common operating costs.
• Define spending categories such as:
• Advertising expenses
• Travel – Flights and/or Driving
• Entertainment at restaurants
• Subscription services, such as internet, cable, phone services

Once assessed, research cards to determine how to earn more on these types of purchases. Most credit card providers offer rewards points for specific categories such as airline credits for free flights or ability to upgrade subscription services after a certain spending limit is achieved.

If no specific pattern is realized, a cashback card may be a good solution.

These cards offer anywhere from 1 to several percentage points cash-back for specific purchases. Some offer a flat cashback rate for any purchase.

3. Research Additional Benefits

Business cards can provide a wide range of benefits beyond streamlining business spending and earning rewards. Many of the best business cards have special financing offers, spending management tools, purchase protections and more. Here are some perks to consider when comparing business cards:

Spend management tools.

• Business card platforms allow business owners and their accountants to track spending. From capturing images of receipts and itemizing them to integrating reporting with accounting software—organized spending is more possible than ever before.  

Special financing. 

• Many business credit cards offer 0% APR introductory rate for the first year, or similar time frame. Businesses may want to plan for larger purchases that would otherwise be funded with a separate line of credit. A large technology purchase, office redesign, or piece of equipment are some examples.

Insurance and other protections. 

• Look at what the provider offers in terms of insurance and fraud protection. Some cards come with identify theft protection; travel insurance; AD&D insurance and more. These benefits can help save your business money if it doesn’t have to be a separate expense—just a card perk.

Free employee cards. 

• It’s fairly common for a business card to offer employee cards at no additional cost, but just check the terms before you choose a card, since some premium business cards may charge a fee for employee cards.

4. Implement the card program that fits

Now that you have the basics down and once you evaluate your business spending habits, it should be possible for you to realize more benefits with the right card type. Whether your needs are simple or complex or cash or rewards are more important to you, you can start progressing towards those added benefits today with the right credit cards in place.  

By Mel M. Toy, CTP Director of Treasury Services at PyraMax Bank.