With so many credit cards available, it’s not surprising that careful thought is required to decide which one to select. Here are some factors to consider when choosing the card that suits you best.
Most real estate agents that I do financial planning for are hesitant when it comes to debt. Honestly, I am too. But when you run a business that requires a fair amount of lunches, photography, signage, digital marketing and others, a good business credit card can do wonders!
Many millennials have a cautious attitude towards credit, perhaps due to large student loans. Nonetheless, the right credit card, responsibly managed, can provide you with beneficial perks.
First and foremost, don’t spend what you don’t have. If you have followed my advice on profit first bookkeeping, you should have money set aside from each commission check into an operating expense bank account. This is the account that you pay your credit card off with each month.
So, expenses on the business credit card, then your operating expense bank account pays that credit card back each month.
Your first business card might be basic. If you’re business has no credit history or a low credit score, your first card will probably offer few frills and a modest credit limit. The good news is that there are cards that match this description and charge no annual fee. You can use your first card to establish your creditworthiness by making timely payments.
For my business, Lifepoint Financial Design, my LLC had no previous credit history when I started it, but I was still able to get a good amount of credit and favorable perks.
Cash back, points, or miles? Many cards offer rewards when used to make purchases. Cash back cards offer cold hard cash, the most versatile reward. You’ll find cards that offer 3% to 5% back (or more) on selected purchases and at least 1% cash back on all other purchases. If you like to travel, you might consider cards that offer frequent flier miles on one or more airlines. The third type of reward, points, can be exchanged for cash or miles or can be used to purchase selected items directly.
Travel is something that is very important to my family, so I went with a business card that offered very favorable travel benefits.
The Chase Business Ink card offers bonus points for my company’s top 3 spend categories and 1 point for every dollar spent on everything else. The card also has point-to-point transfers to many hotel and airline rewards programs.
Cards compete by offering introductory bonuses to new members. Some cards may offer to pay you a lump-sum bonus if you use your card for a set amount of purchases in the first few months after opening the account. You might also be offered an introductory period of 0% interest on purchases and balance transfers. The period might run from 6 to 18 months. After that, you’ll be assessed interest at a specified annual percentage rate (APR) on any remaining balance that you don’t fully pay by the due date for the current billing cycle.
Be careful here to choose a card without too high of a spend requirement. In my search, I came across a card that offered a lot of up front perks. But, it required spending $25,000 in the first 3 months. That was too rich for my blood and a recipe to get myself into debt troubles right off the bat.
Understand all the card’s features. Some cards offer high bonus rewards on purchases from selected types of merchants, and some of these cards rotate the merchant type each quarter. If you accept a card with rotating merchants, remember to activate your participation each quarter if you want to earn the high rewards. Some cards that charge an annual fee will waive it for the first year. Annual fees might range from $49 to $500 or more. Cards can offer all type of benefits, such as free car rental insurance and free baggage check-in. Read all the fine print before choosing which card to get.
Your credit card usage should fit into your savings and investment plans. It’s important to avoid chronic large credit card balances that compromise your ability to save for your retirement. But it’s also important to establish a positive credit history.
If you want to review your savings and investment plans, click the button below and we can try to find the right solution for your business. Together, we can refine your monthly budget to accommodate credit cards without shortchanging your important financial goals.
Disclosures: Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual.