Decide the Card Type before you start Shopping

When we discuss finding the right credit card for your business, you might wonder if it makes a difference what size your business is and whether you work by yourself as a 1099 Independent Sales Agent or you own a regular business. If you have ever worked as a 1099 Independent Sales Agent, you will know that it is your own business. Your needs will be the same but there are factors that you will need to explore.

Will you be getting a single credit card for your use? Or might you consider issuing cards for employees? In the majority of cases for small businesses, credit card accounts will have a single number. It is only one account. If you are issuing cards, you will need to establish clear rules for what the card can be used for and what it may not be. Although I’d recommend every month, be sure to closely scrutinize statements for the first few months to ensure adherence to your guidelines on card usage.

If you have an account (or accounts) with different numbers; arrange the account so that the employee pays the bill and expenses the items back to the company. This can reduce the risk significantly as you’d have option to reject paying for items outside of your rules.

Have the discussion with the issuer of choice about Level 2 or Level 3 processing. Some retail stores can do Level 2 (although many are not set up to do so). Level 2 consists of additional information like a Purchase Order number. It is used in a Business to Business (B2B) environment. Level 3 includes even more information submitted by the supplier to the card issuer including item numbers and quantities. Level 2 and Level 3 are more secure for your business, the supplier, and for the issuer. If you decide upon a purchasing card or a corporate card, it will likely have the options for Level 2 and Level 3.

If you require additional information to be reported during credit card transactions, you are helping your employees to use the card as you intended. However, by requiring additional information, you may limit the number of locations where the card can be used.

You will need to determine what you are looking for in the card you select:

  • High Line of Credit
  • Low Rate of Interest
  • Can You Carry a Balance?
  • Do You Want to Earn Rewards on Your Purchases?

High lines of credit will mean business owner will need impeccable credit scores and history. With high limit cards, there are normally high annual fees, for instance Master Card’s Black Card has a $495 annual fee. High limit cards besides the Black Card include Chase Sapphire, American Express, and a couple from Capital One and Discover.

Getting a low rate of interest will typically mean that there are no rewards attached. This type of card might be best for carrying a balance. Otherwise, I’d look at cards that carry rewards.

Carrying a balance is not a great thing to do with business cards on a month to month basis. If you intend to do so, aim for a lower interest rate card and don’t get an American Express no balance card.

The vast majority of business owners (still including the 1099 Independent Sales Agents) will want rewards cards. Rewards cards can help business owners earn on purchases they need to make anyway. Capital One runs one commercial where a business owner claims he earns $36,000 a year in Rewards, which he uses for the employee health coverage.

When considering rewards cards, you need to decide what type of rewards that you are looking for. Some common ones include:

  • Miles (Capital One and American Express Delta cards are two popular choices)
  • Cash back (Capital One, Discover, and most banks and credit unions have these along with shopping clubs like Sam’s and Costco)
  • Hotels (Marriott and other chains have branded cards)
  • Gas
  • Fleet

The cards listed are for illustration only. There are many sites willing to dig in and try to find the “perfect” card for your business. This site is not about that. I’d like to provide information to the business owners and then let them decide what card best meets their needs.

If you travel extensively; Miles or Hotel cards might be best for you. If you have separate cards for employees, you will need to specify who gets the credit for the miles or hotel rooms. Many employees will say that if they are flying for business and paying the bills then they should keep the miles or points. Fair enough, but if filing expense reports for reimbursements for flights then you need to create clear rules.

For the road warriors and people who drive extensively, gas cards can be beneficial. I live in the Midwest and I’d consider a card from Speedway. The card brings discounts on gas and convenience store items. I do have a stand-alone rewards card for Speedway but currently need to dip one card, then the payment card.

Fleet cards are for those with a fleet of company cars, trucks, or service vehicles. Fleet cards can be bank issued (MasterCard, Visa, etc.) or Specialty cards including Wright Express (WEX). When test driving for Roush, we had about 100 cards that were issued. All had the same number. So, when using the cards, we needed to enter vehicle number and mileage at each fueling. Fleet cards also allow employees to service vehicles if needed without paying out of pocket.

One tip that I will give for the one-man shops and 1099 Independent Sales Agents. Keep a calendar in Google, Outlook, or whatever form you like; and use a single credit card for all business expenses. The moment that the expense is posted on your account, pay it off. When your quarterly taxes are due; take your calendar and credit card statements to your accountant.

Bonus tip:

Have you considered using your credit card for your office lease? Even if your landlord charges an added fee, the expense is tax deductible and you are receiving rewards for the expense.

If you are a real estate professional and you pay $1,500 a month office rental, imagine the miles or hotel stays that you can get for that $18,000 a year just in office fees.

Additional resources:

If you would like to do some thorough research once you know what type of card is best for your business. Please take a look at these sites.

Where you see links to the issuer, it normally will mean that the site earns money from the issuer. This site is not making money from links. They are provided only to help the reader find additional sources. The reader can also Google terms like “credit card options”.

If you have any comments, I’d love to hear from you.

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