Self Employed Guide to Choosing the Right Credit Card for Business

A credit card for even the smallest business is close to essential.

The convenience of having all of your business expenses on a monthly statement saves money. Having all expenses in one place means that no business deductible is overlooked come tax time and saves you time as well. And it simplifies the paper trail if you ever get audited.

As a business customer at the bank, you have to love skipping the long line of unwashed regular customers and going to the short business queue. But that love shouldn’t extend to leaving money at the counter because you took the first business card the bank offered when you set up your accounts.

Credit card companies are coming up with a range of specialised cards to meet the needs of a wide range of small businesses and you would do well to think about how you plan on using the card before choosing a credit card for your business.

Here are some types of credit cards suitable for different situations common to the self-employed.

I just want a credit card for keeping track of my expenses

This is me and it is probably most of you too.

I paid $100 a year for the privilege of keeping my business and personal expenses separate on my first business card.

That is just wrong.

Some credit card companies have figured this out and are offering no annual fee cards to appeal to these customers.

You won’t earn a bunch of points. You will be punished like only a credit card company can if you carry a balance from month to month. But if you don’t have a ton of expenses and always pay off your card, then look for no annual fee cards.

I need the card to cover startup costs

It is part of my job to promote credit cards, but I really have to warn that you should absolutely put the effort in to exploring other financing avenues before resorting to credit card debt because credit cards offer the worst terms of any financing options.

Financing a business with credit card debt is also the easiest way to get financing. But if the easiest path is more important to you than best, then maybe you had better rethink this whole going in to debt to start a business thing.

Having said that, some of the biggest companies in the world today were startups financed by credit card debt.

If you decide that you need a card to cover startup costs, then you would do best to look for a card that doesn’t charge interest during an introductory period.

Terms vary from card to card, but we are currently recommending cards that give you six or 12 month before you start paying interest which is a good chunk of time to pay back the startup costs.

These cards typically require that you have a good credit rating and they are best for people who will be able to pay off startup debt before the introductory period expires.

I need a card to pay for inventory

One of the newest types of small business credit card is the vendor financing card.

Vendor financing cards let you pay a tiny fraction of your inventory costs up front and then pay off the balance a couple of months later after you have had time to sell the inventory.

It probably isn’t necessary for most self-employed small businesses, but is a great option for businesses that deal with multiple vendors and don’t want to negotiate vendor financing directly with each vendor.

Choosing the right credit card

If none of the above options seem to suit you, then it may be that a standard rewards card is right for you where you basically need to put enough on the card to get more rewards back than you pay in annual fees.

It pays to put some thought in to how you plan on using your credit card before signing on any lines so much so that it can make the difference between a successful business and a failure