A Wall Street Journal Article–

Credit-card issuers and banks have been expanding their offerings for small businesses. It is often much easier and faster for start-ups to open a credit-card account than to secure a line of credit from a bank. And a credit-card account is also a good way to establish credit in a business’s name.

With dozens of choices, keep several issues in mind. First, what are your spending habits? Do you plan to pay charges each month, or pay them off over time? If you are carrying a balance, pay attention to the annual percentage rate. If you carry a balance, and have good credit, some card issuers may offer you a low interest rate or even a teaser rate as low as 0% for the first year. Some have fixed rates, which could be attractive when rates are rising.

If you pay in full each month, cards with longer grace periods or more generous rewards may be more appropriate.

A related note: Charge cards may be useful to a small business that needs the use of credit for a short time period. The charge card forces the holder to have the financial discipline to pay the full balance amount, usually within 30 days, or penalties apply. Credit cards, on the other hand, provide maximum flexibility for small-business owners. However, that flexibility can be costly if you don’t pay off your balance in full and you pay interest on it.

Many credit-card issuers offer rewards programs. A company that does a lot of travel may want airline-mile rewards. But review the list of exclusions since some programs are so restrictive that you may not be able to benefit from them. If travel isn’t a major factor, consider cards that offer cash back. Many give 1% to 5% back–but pay attention to the fine print. Higher payments may apply to only certain types of purchases, such as business supplies or gasoline. Look for other perks as well. Some cards provide benefits just for using the card, such as discounts at certain retailers, restaurants or services, access to airport lounges and hotel upgrades.

Some cards that charge annual fees may make sense if a particular benefit is worth more to you than the amount of the fee. Another reason to not mind an annual fee is a longer grace period. Some cards with annual fees may offer up to 30 days to pay off without any charges, compared to 20 days on other cards. But if you carry a balance, you might want to get a lower rate versus a card that has no annual fee but has a higher rate.

Visit an online credit-card comparison site to sort through the array of offerings.CreditCards.com, CardRatings.com and Bankrate.com allow visitors to search for cards with sorting tools and apply directly online.

Be aware of what happens if you can’t pay the bill in full each month or make a late payment. Some issuers will take away any rewards earned, in addition to assessing penalties and fees. Don’t ignore the ramifications of not paying on time. You could face steep charges, a higher interest rate–often approaching 30%–and even put your own personal credit score in jeopardy.

Original Post: http://guides.wsj.com/small-business/funding/how-to-pick-a-credit-card-for-your-business/

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