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A Guide to Shopping For Business Credit Cards For New Business Owners

When starting a new business, if you're trying to get approved for a business credit card there are several things of which you should be aware. You will be personally accountable to the credit card, you will need to know in advance if you will be keeping a balance, and you should be aware of possible low interest rates you can take advantage of. In this article I'll take you through the knowledge you'll need in each of these factors.

First, you'll need to know that no credit company will issue a card to a new business without the owner giving his personal guarantee. In other words, they will look directly at your personal credit score and you'll be responsible for repaying the debt if the business fails. A business card with no personal credit involved is the holy grail for most new business owners, but it simply isn't possible until you build a history of business credit by opening Net 30 accounts with vendors that report to Experian, as well as registering your business with Dunn & Bradstreet. A long period of time in business, with a number of employees and a terrific business credit history is the only way you'll even be considered for a business credit card with no personal guarantee. So forget about it for now.

Second, you'll need to figure out if your business will be able to pay back its entire credit balance each month or not. Seriously, sit down and figure this out in advance.


The credit companies want you to keep a debt on your card as they can then charge you the rather high interest rate, or APR. This is how they make money. So they have incentive to keep you making purchases on your card. In tempting you to do so, they will often offer rewards for using the card, such as a percentage of cash back on certain purchases or frequent flyer miles. The strategy is not unlike retail stores using "loss leaders" to tempt you into the store in hopes you'll also buy something more expensive.

In both of these situations you stand to save quite a bit of money by not falling into the trap the credit companies have set for you. So if you know for sure your business can consistently pay off the card balance each month, look for rewards related to your business.

For instance, if you will be flying a lot, look for frequent flyer miles related to your favorite airline. Even better, look for cash back on airline tickets. This can save even more than airlines miles. If you will be taking clients out for dinner, there are several cards that cater to the heavy restaurant user. Cash back as well. If there are services you'll be using frequently, such as FedEx, there are cards that offer discounts on this as well. All these savings can add up over the long term and should definitely be taken advantage of. Again, if you can't pay off your balance each month, the rewards systems will be worthless to you. However, even in this case there are still some choices for you.

Many business credit cards offer a 0% APR for the first six months to a year of your account. For a new business owner, this can lead to incredible savings. In a small way, this can even be seen as "venture capital" of sorts. Since many business cards can offer credit limits of $50,000, you could use this introductory APR to get your business off the ground and not owe any interest at all! In how many other situations can you do that?!

Of course, you must do your due diligence and realize that some 0% introductory cards will then go on to have a higher than average APR after the introductory period is over. And as I said earlier, as a new business owner you will be personally responsible for the debt. Don't get in over your head.

So sit down, and figure out if you'll be able to pay off your balance each month. If so, shop around for rewards that match your business needs. If not, look very carefully at cards with a 0% introduction period, making sure the ultimate APR is not higher than average. And just get over the thought of getting a business credit card as a new business owner without having to give your personal guarantee. It isn't going to happen.

By Jake Everett