C-Suite Advisory

No-Fee Business Credit Cards: Are They Right For You?

Cashier Credit Card Payment

For business owners, there are few financial tools as useful as a good business credit card. Business credit cards have some advantages over personal credit cards when it comes to covering work-related expenses. One way that business and personal cards are similar, however, is that you’ll need to decide whether paying an annual fee for one is worth it.

There are so many different business credit cards on offer nowadays, it can be difficult to know which one is right for you and your business.

Plus, business owners are understandably cost-averse. If you get a card with an annual fee, are you overpaying? Conversely, if you sign up for a no-fee card, will you miss out on lucrative bonuses that would have been easy to accrue?

Whether you should apply for a no-fee business credit card depends on your specific situation, spending habits, and needs. That being said, there are some across-the-board considerations and other perks you should know about that may help drive your final decision.

Why use a business credit card?

The appeal of a business-specific credit card may not be clear to you.

You may already have a personal credit card that you use often, with an interest rate you’re comfortable with. Why take on the added pressure of another form of credit?

But separating your business and personal expenses is a must, not only to help you stay organized come tax season, but for the legal and liability protections that come with doing so.

Even if your business is an LLC, S-Corp, or C-Corp, you are “piercing the corporate veil” if you use the same credit card to finance personal and business expenses. That means you can be held personally liable for debts and damages incurred by your business entity. This exposes your personal assets to seizure as well.

Additionally, using a business credit card helps you build business credit—a separate score from your personal credit score that will help make you eligible for larger financing options in the future.

What are no-fee business credit cards?

No-fee business credit cards are credit cards used specifically by business owners that carry no annual charge. It doesn’t refer to interest rate or APR (though we’ll get to those in a moment).

Some business credit cards, just like personal credit cards, will charge you an annual fee, which typically ranges from $95 to $295 or more.

The tradeoff is quite simple: The higher your annual fee, the more opportunities you’ll have to earn rewards and points that can be translated into savings for your business. It’s your responsibility, however, to use your points most effectively in order to make your money back.

Which is better: A credit card with a fee, or without a fee?

It’s difficult to say that a credit card with a fee is “better” than one without.

A good rule of thumb is as follows: If you plan to use your business credit card often, and rack up lots of expenses (which you then expect to pay off promptly and on-time), a credit card with a fee may quickly end up paying for itself. If you won’t use your card very often, a no-fee card that doesn’t charge you for simply owning it is more likely the way to go.

That being said, the best card for you will likely differ on a case-by-case basis. Let’s examine some of the leading no-fee business credit cards to see what they offer:

Chase Ink Business Cash Credit Card

The Ink Business Cash card is best in its class for business owners that want cash back. It offers a wealth of perks, including:

  • $500 cash back welcome offer when you spend $3,000+ in the first three months
  • 0% intro APR for the first 12 months on purchases and balance transfers
  • 5% cash back at office supply stores and on internet, cable, and phone services, capped at $25,000 spent annually
  • 2% cash back on gas and restaurants, capped at $25,000 spent annually
  • 1% cash back on all other purchases

One of the most important perks on that list is the 0% introductory APR for a year—which means you essentially receive access to an interest-free loan for 12 months. You still have to make your minimum payments on time, but assuming you do, that’s access to potentially tens of thousands of dollars upfront at no additional cost.

Bank of America Business Advantage Travel Rewards World Mastercard

This BoA card is suited more for business owners who travel often for work:

  • 25,000 point sign-up bonus after spending $1,000 in the first 60 days
  • 3 points on travel booked in the Bank of America portal
  • 1.5 points unlimited for every dollar spent on all other purchases
  • 0% intro APR on purchases for first 9 billing cycles

Note that this card also has a 0% intro APR, albeit for just nine months.

SimplyCash Plus Business Credit Card from American Express

Another excellent cash back-focused card, American Express offers the following perks with its no-fee card:

  • 0% intro APR on purchases for the first 15 months
  • 5% cash back on first $50K spent on wireless telephone services
  • 3% cash back on first $50K spent in a category of your choice
  • 1% cash back on all other purchases

This card features the longest 0% APR offer of them all. In fact, not even the American Express Business Gold card—which has an annual fee of $295—offers that.

Capital One Spark Classic for Business

Unlike the other cards listed here, the Capital One Spark Classic is more of a tool for building business credit than for building up rewards points. You’ll get 1% back on all purchases (with no cap), but that’s about it.

This is an unsecured card, however, eligible for business owners with a credit score of 550 or above. Combine that with no annual fee, and you’re looking at a free, easy way to build credit while still getting some bang for your buck.

There are many more options for business credit cards without annual fees—in fact, business credit cards with fees are harder to come by. Cards with fees, however, typically have heightened reward rates, such as more points back per purchase or higher limits before the cap.

A no-fee business credit card may be the perfect solution for business owners looking to build credit, give themselves financial breathing room, and accrue useful points or cash back to fund their venture. Don’t think that you need to spend money just to make money with a business credit card.

Written by Jared Hecht.

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Jared Hecht
Jared Hecht is the co-founder and CEO of Fundera, an online marketplace for small business financial solutions. Prior to Fundera, Hecht co-founded group messaging app, GroupMe, a group messaging service that in August 2011 was acquired by Skype, which was subsequently acquired by Microsoft in October 2011. He currently serves on the Advisory Board of the Columbia University Entrepreneurship Organization and is an investor and advisor to startups such as Codecademy, SmartThings and TransferWise. Jared Hecht is an opinion columnist for the CEOWORLD magazine.