Business credit cards are one of the most popular ways to finance a small to medium-sized business. Choosing the right type of credit card you want for your business is the more difficult decision though. The right choice for your business depends on multiple factors, such as your plan for the funds, the amount of debt you have, your credit score, and the financial health of your business. Here’s a little basic information, as well as the advantages and disadvantages, of using a business credit card. Pros of Business Credit Cards 0% Interest (Sometimes) Some business credit cards offer an introductory 0% APR. Remember though – this only lasts for a certain period of time, like 12 months. Then you do have to start paying interest. Keep in mind that the interest still accrues during the interest-free period. This means you will have to pay that interest off if you fail to repay the balance during the interest-free period. Rewards and/or Cash Back Perhaps the best perk with a business credit card are the rewards and cash back that many credit cards offer. If you frequently travel, then picking a card with great travel rewards could save you money. You have to make purchases anyway, so you may as well get something in return for spending the money. This can be especially beneficial if you have a business with lots of expenses. No Collateral Credit cards are considered an unsecured debt which means you don’t have to put up collateral before getting a credit card. Because of this, the approval process is much easier for a business that doesn’t have a lot of of assets. Easy to Track Expenses Finally, expense tracking is easy with a business credit card. You just put all business-related expenses on the business credit card and sync the monthly statement with QuickBooks. No more having to find business expenses on your personal credit card statement. Also, not using a personal credit card for business will make a stronger corporate veil. This means that if you take out a credit card under the business’s name and default on the debt, the credit card issuer can’t go after personal assets like your home or your car. Instead, they will go after the business’s assets. This also means that your personal credit score is protected. Net-30 Terms Another big advantage with credit cards is the net-30 (and sometimes net-60) terms, which can make managing your cash flow much easier. This does have one caveat though. You must pay off your credit card in full every month. If you don’t, then you will have to pay interest. The interest payments will greatly reduce the net-30 benefit of the credit card. Cons of Business Credit Cards High Interest The biggest downside with a business credit card is typically the interest rate. You can expect 12% to 22% APR with a business credit card. That is a high interest rate and can easily get out of control if you only make the minimum payments. The best way to avoid the high interest rates is to pay off your card in full every month. That obviously is not always possible, but it is the only way to avoid paying interest on your credit card. Personal Guarantee Most business credit cards will require a personal guarantee because they don’t require collateral, and this means that the credit card company can go after your personal assets in the event your company fails to make any payments. This shouldn’t be an issue, but it can be an issue if things go wrong. You should take this into account before you get a business credit card. High Fees Finally, the high fees associated with credit cards often scare business owners away. These fees include the interest rate, which can range from 12% to 22%. It can also include an annual fee. Is a Credit Card Best for You? Deciding on whether to get a credit card for your business depends on so many factors that it is hard to give blanket advice. You’ll want to look at your spending habits for example and pick a credit card that will offer rewards for what you spend money on. You’ll also want to look at other factors like APR and annual fees. A business credit card works great for businesses of all sizes. A small business can use them to extend payment terms on various expenses. The one thing to watch out for with a credit card is the high interest rate. Many people see the rewards and the longer payment terms and ignore the interest payments. Don’t make that mistake. You want to make sure that you fully understand how the interest works before you sign up for a business credit card. Final Thoughts Credit cards make an excellent choice for small businesses. You have to understand what you need before you decide to apply for one. The good news is that you can earn great rewards with a credit card and use these rewards to reinvest in your business. Just be sure to do your research so that you choose the right one for your business.