Business Credit Cards for Startups: Top Picks This Year and How to Choose Wisely
Securing funding and managing expenses are crucial aspects of launching and scaling a startup. Business credit cards for startups offer a valuable tool for building business credit, managing cash flow, and earning rewards on business-related purchases. However, with a plethora of options available, choosing the right card can be overwhelming. This article provides a curated list of top business credit cards for startups this year, along with a comprehensive guide to help you evaluate your needs and make an informed decision.
Why Startups Need Business Credit Cards
Using business credit cards for startups goes beyond simple convenience. They are critical to building a solid financial foundation for your company.
Benefits of Business Credit Cards for Startups
- Separating Business and Personal Finances: This is crucial for legal and accounting reasons. It simplifies tracking business expenses and protecting your personal assets.
- Building Business Credit: Establishing a good business credit score is essential for securing future loans, lines of credit, and favorable terms with suppliers.
- Managing Cash Flow: Business credit cards provide a line of credit that can be used to cover short-term expenses and bridge gaps in cash flow.
- Earning Rewards and Perks: Many business credit cards offer rewards programs that can help you save money on business-related purchases, such as travel, office supplies, and advertising.
- Tracking Expenses: Business credit cards provide detailed records of your business spending, making it easier to track expenses and prepare tax returns.
- Access to Capital: They can provide a much needed source of capital for a new business.
Understanding Business Credit Scores
Business credit scores are different from personal credit scores. They are used by lenders and suppliers to assess the creditworthiness of your business. The most common business credit scoring models include:
- Dun & Bradstreet (D&B) PAYDEX Score: This score ranges from 0 to 100 and measures how reliably your business pays its bills.
- Experian Business Credit Score: This score ranges from 0 to 100 and assesses your business's credit risk.
- Equifax Small Business Credit Risk Score: This score ranges from 101 to 992 and predicts the likelihood of your business defaulting on its obligations.
Factors that influence your business credit score include:
- Payment History: Paying your bills on time is crucial for building a good business credit score.
- Credit Utilization: Keeping your credit utilization low (the amount of credit you're using compared to your credit limit) is also important.
- Company Size and Age: Older and larger companies generally have higher credit scores.
- Industry: Some industries are considered riskier than others.
- Public Records: Bankruptcies, liens, and judgments can negatively impact your business credit score.
Key Factors to Consider When Choosing a Business Credit Card
With so many business credit cards for startups available, it's essential to carefully evaluate your needs and choose a card that aligns with your business goals.
1. Your Spending Habits
Analyze your business spending to identify your most significant expense categories. Choose a card that offers bonus rewards on those categories. Consider:
- Travel: If you travel frequently for business, look for a card that offers rewards on flights, hotels, and car rentals.
- Office Supplies: If you spend a lot on office supplies, look for a card that offers rewards at office supply stores.
- Advertising: If you spend a lot on advertising, look for a card that offers rewards on online advertising platforms.
- Software: If you are buying a lot of SAAS, or Software as a Service, look for a card that rewards those purchases.
2. Interest Rates and Fees
Pay close attention to the interest rates (APRs) and fees associated with the card. Choose a card with a low APR and minimal fees to minimize your borrowing costs.
- Annual Fee: Some cards charge an annual fee, which can offset your rewards earnings if you don't spend enough to justify the fee.
- Balance Transfer Fee: If you plan to transfer balances from other credit cards, consider the balance transfer fee.
- Late Payment Fee: Avoid late payment fees by paying your bills on time.
- Cash Advance Fee: Avoid cash advance fees by not using your credit card for cash advances.
- Foreign Transaction Fee: If you plan to use your card while traveling internationally, ensure it doesn't charge foreign transaction fees.
3. Rewards Program
Evaluate the rewards program carefully to determine how much you can earn and how easily you can redeem your rewards.
- Cash Back: Some cards offer cash back on all purchases or bonus cash back on specific categories.
- Points: Some cards offer points that can be redeemed for travel, merchandise, or gift cards.
- Miles: Some cards offer airline miles that can be redeemed for free flights.
- Redemption Options: Consider the redemption options and choose a card that offers options that align with your needs.
4. Credit Limit
Choose a card with a credit limit that is sufficient to meet your business needs. However, be careful not to overextend yourself and keep your credit utilization low.
5. Additional Perks and Benefits
Some business credit cards offer additional perks and benefits, such as:
- Travel Insurance: Coverage for trip delays, lost luggage, or rental car accidents.
- Purchase Protection: Coverage for damaged or stolen items purchased with the card.
- Extended Warranty: Extends the manufacturer's warranty on eligible purchases.
- Concierge Services: Assistance with travel planning, restaurant reservations, and event tickets.
- Employee Cards: The ability to issue employee cards to track spending and earn rewards on employee purchases.
- Reporting Tools: Robust reporting tools to track expenses and manage cash flow.
Top Business Credit Cards for Startups This Year
Here are some of the top business credit cards for startups this year, categorized by their strengths:
For Flexible Rewards and Travel Perks:
1. Chase Ink Business Preferred® Credit Card
- Rewards: 3 points per $1 on the first $150,000 spent in combined purchases each account anniversary year on travel, shipping purchases, internet, cable and phone services, and advertising purchases made with social media sites and search engines. 1 point per $1 on all other purchases.
- Sign-Up Bonus: [Check for current sign-up bonus - often a large points bonus after spending a certain amount in the first few months]
- Annual Fee: [Check for current annual fee]
- Why It's Great for Startups: Excellent rewards on common startup expenses, travel perks, and the ability to transfer points to valuable travel partners.
For Simple Cash Back:
2. Capital One Spark Cash Plus
- Rewards: Unlimited 2% cash back on every purchase.
- Sign-Up Bonus: [Check for current sign-up bonus]
- Annual Fee: [Check for current annual fee]
- Why It's Great for Startups: Straightforward 2% cash back on all purchases, making it easy to earn rewards without tracking categories.
3. American Express Blue Business Cash™ Card
- Rewards: 2% cash back on the first $50,000 in purchases each calendar year, then 1% cash back.
- Sign-Up Bonus: [Check for current sign-up bonus]
- Annual Fee: $0
- Why It's Great for Startups: Solid 2% cash back on a significant amount of spending, no annual fee.
For Building Credit:
4. Capital One Spark Classic for Business
- Rewards: 1% cash back on all purchases.
- Sign-Up Bonus: None Typically
- Annual Fee: $0
- Why It's Great for Startups: Can be easier to qualify for than other business cards, helps build business credit.
For Travel Specific Rewards:
5. United Club℠ Business Card
- Rewards: 2 miles on United purchases, 1.5 miles on all other purchases.
- Sign-Up Bonus: [Check for current sign-up bonus]
- Annual Fee: [Check for current annual fee]
- Why It's Great for Startups: Has travel specific perks such as free checked bags and United Club access, which make it easier to travel and work.
How to Apply for a Business Credit Card
The application process for business credit cards for startups is similar to that of personal credit cards. However, you'll need to provide information about your business as well as your personal information.
Information Needed
- Business Name and Address
- Business Type (e.g., sole proprietorship, LLC, corporation)
- Employer Identification Number (EIN) or Social Security Number (SSN)
- Annual Revenue
- Number of Employees
- Your Personal Information (Name, Address, Social Security Number)
Tips for Approval
- Have a Solid Business Plan: A well-defined business plan can demonstrate your business's potential and increase your chances of approval.
- Keep Your Personal Credit Score High: Your personal credit score is often a factor in the approval process, even for business credit cards.
- Provide Accurate Information: Ensure that all the information you provide is accurate and consistent.
- Apply for a Card You're Likely to Be Approved For: Choose a card that aligns with your credit profile and business needs.
Managing Your Business Credit Card Responsibly
Once you're approved for a business credit card for startups, it's essential to manage it responsibly to build credit and avoid debt.
Best Practices
- Pay Your Bills On Time, Every Time: Payment history is the most important factor in your business credit score.
- Keep Your Credit Utilization Low: Aim to keep your credit utilization below 30%.
- Monitor Your Credit Card Statements: Review your credit card statements regularly to check for errors or fraudulent activity.
- Separate Business and Personal Expenses: Use your business credit card exclusively for business expenses to simplify tracking and reporting.
- Reconcile Your Expenses Regularly: Reconcile your credit card statements with your accounting software to ensure accuracy.
Conclusion: Fueling Your Startup's Growth with the Right Credit Card
Business credit cards for startups are a powerful tool for managing cash flow, building credit, and earning rewards. By carefully evaluating your needs, comparing different card options, and managing your credit card responsibly, you can choose a card that fuels your startup's growth and helps you achieve your business goals. Remember to prioritize building a strong business credit score to secure future funding and favorable terms with suppliers. With the right business credit cards for startups in your arsenal, you can confidently navigate the challenges of launching and scaling your business.
