Business credit cards certainly are handy to have. They provide business owners with a flexible source of operating capital, make doing business online possible, provide a way to build business credit, and make tracking business expenses for tax purposes a simple matter. Of course, all that convenience comes with a cost, and some credit cards are more costly to use than others. Business credit cards are not covered by the CARD Act, so business owners should play close attention to the fine print when applying for them. What types of fees should they look out for?
Minimum Interest Fee
If your business credit card has a minimum interest fee, you will be charged a minimum amount, even if the interest on your credit card balance is less than the fee itself. The fee does not usually amount to much, but it still rubs many business owners the wrong way. It can be avoided by not carrying a balance from month to month.
There are some business credit cards that have no annual fee, but many do. Before signing up for a credit card, business owners should make sure they know how much the annual fee is, so it does not surprise them when they are charged. Some credit cards with fees are worth having, but the annual fee should be taken into consideration when evaluating any business credit card’s terms.
Foreign Transaction Fees
If the nature of your business dictates that you frequently travel abroad, you should pay special attention to this fee. At around 3%, this fee might not seem like much, but it can add up, especially on larger purchases.
Cash Advance Fees
Using a business credit card’s cash advance feature is much more costly than simply using it to make purchases. There is usually a fee of up to 5% of the total amount of the cash advance, and the interest rates are usually higher, as well. Not only that, but because the CARD Act does not apply to business credit cards, card issuers are free to make future payments apply to the lower-interest portion of the balance, leaving the cash-advance portion to accrue interest at a higher rate.
Balance Transfer Fees
One enticing benefit that credit card issuers use to entice borrowers is the low or zero-interest balance transfer. Many times, taking advantage of these incentives can save business owners thousands of dollars. But, it is important to be wary of balance transfer fees, as they can be substantial. Also, some cards may have late-payment penalties that cause the introductory rate to be rescinded.