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Reading Between the Credit Offer Lines

Tue, 06/03/2014 - 1:26pm | by Helen Hoart

A successful business carries with it a lot of financial responsibility. Once you've built up your business credit, it also brings about a lot of credit card offers. Your banks and other financial institutions are more than happy to make credit cards available to you after you've proven your business is solid, and you're credit worthy. When you make business credit card decisions, keep certain considerations in mind — the situations you're using the credit cards in, the amount of time you intend on keeping a balance, and whether you need employee cards all determine the best type of card for your situation. Here's what to be aware of:

Credit Card or Charge Card?

Much like personal credit cards, business credit cards come in a few different varieties. The traditional credit card model charges you a specific interest rate on any balance you carry, and you can pay it off over time. The charge card model requires the balance is paid off every month. Business cards may use either of these models, so select the one that works best for your spending habits. Entrepreneur reports more than 1,000 small business-orientated credit cards exist, so it might take some time to sift through the selections.

Interest Rate and Grace Period

You're probably familiar with the default rate many consumer credit cards have. The default rate indicates the interest rate the card gets raised to if you miss a payment. Business card issuers do not need to wait for a missed payment to raise a rate on a card, notes NYDailyNews.com. Be aware of the rate ranges the business credit card company has disclosed in the terms, as you don't want to pay double the interest rate when carrying a large balance on your card.

One way to mitigate this problem is to focus on cards that offer long introductory rates of zero percent, or another low rate. You won't have to worry about the rate changing in the intro period, and if it does suddenly shoot up when the rate period expires, you can transfer the balance to another card. Most sub-$100,000 business loans are issued through credit cards. About 80 banks in the U.S. that hold more than $10 billion were responsible for 66 percent of small business micro-loan lending, according to BusinessWeek.com. Credit card lending isn't as risky as bank loans, so more banks are willing to take the chance on the loan and court small business owners.

Rewards

Credit cards are a great way to spread out payments for large expenses, but they may also be excellent at making your money work for you. You have to spend the money anyway, so getting a reward for necessary expenses is an extra treat. Airline miles, cash back and points to use toward product purchases are three different rewards systems used by business cards.

Personal Guarantee

Some business cards require a personal guarantee, when the credit card issuer wants you to guarantee your credit worthiness with your personal credit. You put your personal score and assets on the line when you allow the company to use a guarantee. If possible, target cards that only affect your business financial health, to protect your personal financial health.

Have more tips on what to look for regarding business credit cards? Share them in the comments.

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