Get expert advice on every topic you need as a small business owner, from the ideation stage to your eventual exit. Our articles, quick tips, infographics and how-to guides can offer entrepreneurs the most up-to-date information they need to flourish.

Subscribe to our blog

What You Need to Know Before Choosing a Business Credit Card for Your Startup

Posted by Neha De

February 10, 2020

It’s a good rule of thumb to keep your personal and your business expenses separate as you begin getting your new startup off the ground.

One of the best ways to do this is by opening a business credit card. In this article, we look at what you need to know before choosing a business credit card for your startup.

When You Apply

It’s worth noting that when you apply for a credit card for your startup, you will probably be asked about your personal credit information. They will also likely check your personal credit score. This is especially true if you are a sole proprietor.

Many times, the credit card issuer will hold you personally responsible for any purchases your business can’t afford to pay back.

Conversely, you will also find credit companies that don’t hold you personally  responsible. Just ask the question and read the fine print. 

Consider the Benefits

First, it is often easier for a startup to open a credit card account than to secure a line of credit with a bank. This makes it infinitely easier for you to  purchase what you need.

Second, a business credit card can help you establish your business credit history. Pay your account on time for a consistent period every month, and you just might be able to get that line of credit from a bank. 

Third, business credit cards typically have higher credit limits than personal accounts. This again makes it easier to take care of your expenses.

Do note that business cards differ from personal cards in that they can change your rates at any time. So, you want to read all the terms and always pay on time. 

Look for Cards with Rewards

If you or your employees expect to travel, consider a credit card that offers travel rewards points. Airline miles are always a good reward.

You can also look for a card with cash back offers as well.

Do read the terms and make sure you understand how much you have to spend to earn the rewards.

You’ll also find that many business cards offer sign-up bonuses, 0% introductory APR, insurance coverage for car rentals, and discounts on travel, restaurants, hotels, and more.

Check out the rewards offerings diligently so you pick the best card for your needs.

Understand the Terminology

As you’re looking through the terms and fine print, you also want to take a look at and understand the fees.

The most important thing to understand is the APR on your account. APR is the annual percentage rate fee that you have to pay when you borrow money from the card issuer.

You are essentially borrowing money from them if you choose to carry a balance from month to month. Your interest compounds daily on the balance you carry if you don’t pay it during your (usually) 25-day grace period.

Here are a few more terms to look out for:

  • Introductory APR: this is often a 0% interest charge for a limited amount of time.
  • Regular APR: this is the interest you will pay after your introductory period ends.
  • Finance Charge: This is the interest you pay on balances you carry over each month
  • Minimum Payment: This is what you absolutely must pay each month.
  • Late Fee: You pay this fee if you don’t pay your minimum payment by the due date.
  • Annual Fee: This is a yearly fee you pay to use this card. Not all cards have this fee.
  • Over the Limit Fee: A fee you get assessed if you charge more than your credit limit.
  • Returned check/returned payment fees: This is another fee you get if your check doesn’t clear your bank due to insufficient funds.
  • Cash Advance Fee: You will be charged this fee when you use your card to take out cash.
  • Balance Transfer Fee: This is either a flat fee or a percentage the card issuer charges you to transfer a balance from another credit card.

To Conclude

With this information in hand, you are now ready to research the best card for your startup.

Read all the fine print, pick a card with the best rewards, and know all the fees you might be assessed.

Once you get your business credit card, be a responsible user so you can increase your credit rating. Managing your finances well will help your business grow and get extra funding in the future should you need it. 

Are you a new startup ready to succeed? Are you looking to get your new business off the ground and watch it rise to success? We are here for you. We can help answer your questions and guide you through the process. Outsource your HR duties, finances, payroll and more to us. Contact Escalon today to get started.

Image:  Ryan Born on Unsplash


Neha De
Neha De

Neha De is a writer and editor with more than 13 years of experience. She has worked on a variety of genres and platforms, including books, magazine articles, blog posts and website copy. She is passionate about producing clear and concise content that is engaging and informative. In her spare time, Neha enjoys dancing, running and spending time with her family.

We provide you with essential business services so you can focus on growth.