So, you’ve been considering getting a business credit card. Having a card can be very beneficial for your company if used properly. You can get discounts, earn rewards, improve your credit, and solve cash flow needs.
You’ve certainly stumbled upon a few exciting business credit card offers, only to be turned away by the annual fee you have to pay. You may be saying, “Why should I pay to have a card when there are many options without a fee?”
While this way of thinking is financially responsible, you may actually be losing out. Here’s why:
1. Business credit cards with annual fees have big sign-up bonuses
You may have discovered that the cards with the highest annual fees also come with the biggest perks. This is made clear when you look at some of the lucrative sign-up offers. They go far beyond 0% intro APR periods and balance transfer deals.
As noted in an article published by The Points Guy, an online blog that teaches people how to maximize use of points, “generally speaking, cards without an annual fee won’t provide the valuable earning potential of cards with an annual fee,” especially when it comes to bonuses.
For example, Chase Bank has several options for business credit cards. Here’s how sign-up offers compared in early 2018:
- Ink Business Cash: As of this writing, there’s no annual fee, and the sign-up bonus is $300 cash after spending $3,000 in the first three months.*
- Ink Business Preferred: As of this writing, there’s a $95 annual fee, and the sign-up bonus is 80,000 points after spending $5,000 in the first three months.*
In the example above, there’s clearly a major difference. 80,000 points can get you at least three round-trip flights in the USA ($300 will maybe get you one flight). That makes a $95 fee to own the card much more worthwhile.
2. Business credit cards with annual fees earn points much more quickly
Many business credit cards without an annual fee don’t earn points at the same rate those with an annual fee do.
To get a clear example of this, compare two of Capital One’s business credit card offerings in early 2018:
- Spark Classic: As of this writing, there’s no annual fee, and you get 1% cash back on all purchases.*
- Spark Cash: As of this writing, there’s a $95 annual fee (which is waived for the first year), and you get 2% cash back on all purchases, plus you’ll get a one-time cash bonus of $500 once you spend $4,500 on qualified purchases with your Cash Card within your first 3 months as a cardholder.
So, you get double the rewards and a cash back bonus on money you would spend anyway by paying the annual fee. With other cards, rewards may be even more lucrative, especially in categories where businesses typically spend money, like airlines, hotels, office supply stores, gas stations, etc. Additionally, some no-fee cards don’t give you access to the most valuable points and miles.
Do note that the fee is only worth it if you actively take advantage of the rewards. As Claire Tsosie, a credit cards researcher and writer, states, credit cards with fees are worth it “when the perks outweigh the fee.” This necessitates that you regularly use the card. Otherwise, you could be in the red.
3. Business credit cards with annual fees have cost-saving benefits
Think of a business credit card as an investment. If the benefits of having the card greatly exceed the costs, it’s worth having one.
Perks from some of the best card issues may include credits for car services, TSA PreCheck and/or Global Entry reimbursement, unlimited Wi-Fi hotspot access, hotel and flight upgrades, access to exclusive airport lounges, cash back on common office purchases—and much, much more.
If you’re thinking about getting a business credit card with an annual fee, look at the rewards the card company provides you. Most of the time, the fee becomes a non-issue when you consider the annual perks—especially when you’re a frequent traveler.
Getting the business credit card that works for you
If you’re looking for a business credit card, don’t rule out those cards that have an annual fee. It may just well be your best option for maximizing rewards, taking care of cash flow, and pushing your business forward. Of course, you should look for the business credit card that aligns with the needs and financial situation of your business, as a Wall Street Journal Guide notes.
For instance, if you need a cheap way to finance business expansion, a credit card with a 0% intro APR offer may be best — and many of these don’t have fees. On the other hand, if you have enough cash flow to make payments in full each month, consider getting a card that brings you business lucrative rewards, like those ones with fees.
As you compare options, perform calculations to see if the fee is worth it. It usually is if you’ll be using the card a lot. Just remember: Do your research and calculations. You can get the best business credit card for your company. And your business can benefit tremendously.
*Be sure to check the issuer’s rates and terms to get the latest information on any of the cards mentioned in this post.
Meredith Wood is the Editor-in-Chief at Fundera, an online marketplace for small business loans that matches business owners with the best funding providers for their business. Prior to Fundera, Meredith was the CCO at Funding Gates. Meredith is a resident Finance Advisor on American Express OPEN Forum and an avid business writer. Her advice consistently appears on such sites as Yahoo!, Fox Business, Amex OPEN, AllBusiness, and many more.