Since April 2009, the top TARP recipients have cut their small business loan balances by $8 billion. While traditional loans dry up and credit lines get cut, banks have decided to funnel more of their small business lending through business credit cards.
This explains the recent surge in business credit card usage, according to the 2009 Small Business Credit Card Survey.
Even though some major credit card issuers like Advanta left the business earlier this year, it’s refreshing to see that banks like JPMorgan Chase launched four more credit cards specifically targeted at small business owners.
As these cards enter the market to compete for your business, it’s important to consider all the perks and compare the costs to the benefits. Here are just a few of the perks and benefits being offered in the new generation of business credit cards.
Many business credit cards now offer cash-back rewards. For example, Chase’s new Ink credit card has unlimited cash back and accelerated earnings. This is a great perk because the card rewards you for spending on everyday business purchases. But make sure you understand what the card’s limitations are and read the fine print before you apply.
Getting frequent-flier miles using your business credit card is a very popular perk for business travelers. Once you accumulate enough points, you can redeem them for airline discounts or free nights at participating hotels. Make sure you know if there are any limitations prior to applying.
No Annual Fees
Many business credit cards now waive their annual credit card fee. Keep in mind that your credit score needs to be strong to get these cards. However, if your business pays its balance in full every month, this is definitely the way to go. In effect, if you pay your balances you get the credit card for free.
Zero-Percent Balance Transfers
This can help you reduce your high-interest debt. Be sure to never miss a payment or you’ll immediately lose your interest-free terms and have to pay the full rate.
Traditionally, the majority of the business credit cards in the marketplace report your payment history and revolving debt to your personal credit files, not your business credit files. However, some companies have started to catch on to the new world of business credit cards, like JPMorgan Chase and American Express. They understand that business credit cards are for business purchases and any debt incurred should only be reported on a business credit report, not a personal one.
When you apply for a business credit card, the credit card company checks your personal credit report, but your payment history and debt are reported to the business credit bureaus. This is what every small business owner should demand from a business credit card.
One important catch is that if your accounts become delinquent then Chase and American Express will report the delinquency to the consumer credit bureaus as well.
No Personal Liability
Keeping liability strictly tied to your business can be accomplished with no-personal-guarantee business credit cards. There are less than 40 of these types of cards available and you’ll need to have a strong business credit file in order to qualify.
With the growth in business credit bureaus, data suppliers, and business credit files across the country, more and more lenders will have to supply an ever-growing demand of new business credit cards, and these cards will have to measure up to the needs of today’s small business owner.
Choose a business credit card that will best serve the demands of your business while supporting the growth of your business credit file and limiting personal liability.