Before you begin comparing credit cards for your business, there are a few things you should keep in mind. Know before hand if you will be able to pay off your entire balance, beware of illusionary reward savings, and keep an eye out for account consolidation if you require it. I’ll take a look at each of these in this article.
First, know this: the credit companies want you to keep a debt, because they can then charge you the interest, or APR, rate. They have every incentive to encourage you to use your card, and to do this they dangle the carrot of “rewards” in front of you. If you’re aware of this, there sits a veritable bonanza of actual savings awaiting you. True, actual, savings. This is comparable to a loss leader in a retail store; the company expects to lose money on a product in the hope that you’ll buy something more expensive, or in the case of a credit card keep a balance and have to pay the interest.
It’s a tried and true marketing technique that has obviously shown its worth over the years as it’s so widespread, but the discerning shopper can take advantage by not following the crowd. That said, some rewards can be tricky with their actual value.
For instance, on some credit card blogs there have been attempts at estimating the value of frequent flyer miles, as this is an ever-popular reward, especially on business credit cards. In general, the consensus seems to be that they are worth around 1 to 2 cents each. In other words, you will have to acquire about 25,000 or more to get one free domestic ticket, assuming a typical price.
However, some say that cash back rewards offer a much better deal. Especially in regards to services heavily used by your typical business. A good example is American Express’s OPEN Network. As of this writing (credit cards are notoriously fluid, so check the current terms to be sure they are still accurate), the OPEN Network offers 3% off the purchase price of JetBlue and Delta tickets. Not only that, but they also offer discounts for commonly-used business services such as FedEx.
Calculate how much you’ll be using the services they offer discounts on, and see what the savings amount to. In many cases, you may find that you’ll save more on cash back rewards than you would with frequent flyer miles. So be sure to take that into account.
The third feature you should keep an eye out for is account consolidation. Some business credit cards offer the option of getting multiple cards on the same account; i.e. cards for employees. For ease of accounting, you can often keep these cards all on the same bill. Many business credit cards offer expense reporting as well. These are very business specific features that you yourself will have to explore, but they can offer a terrific amount of convenience.
So before you compare, make sure you know whether you will be able to pay off your balance in full or not. If not, you may want to consider going with a charge card. If you can pay off the balance, then be careful in selecting rewards systems, especially in regards to frequent flyer miles. And read the terms carefully for the possibility of account consolidation for accounting purposes. All of these options can add up to a quite convenient and useful credit card for your company.