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How to Set Up a Small Business Credit Card Account

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Determining Your Business Needs

Steps:

1. Calculate the total dollar amount of revolving credit that your company will need. As a general rule, figure out how much your company will be spending on a monthly basis and apply for this amount, provided you can pay it off.
2. Determine how many cards the company will need and which employees will require cards.
3. Consider whether you need a system to help keep track of employees’ expenses. Some card issuers offer this type of reporting package along with the card and allow downloading of data to Quickbooks, etc.
4. Examine the travel and entertainment needs of your company. Do you need a card that allows you to earn miles and provides special hotel and rental car benefits? Do you need travel accident insurance?
5. Look for certain features: a low or no annual membership fee, a low interest rate, 24-hour customer service, local branch access, merchant acceptance, overdraft protection and account reports customized for your business needs.

Tips:

• Apply for cards with institutions with which you already do business. You are more likely to get favorable rates and credit lines.
• Choose the employees who will get cards wisely. The company, not the employee, will pay penalties for such things as late payments.
• Choose a card that is widely accepted and allows you and your employees to purchase everything you need.

Warnings:

• Do not apply for a small business credit card if you will be unable to pay off your balance. A negative mark on your credit history can do significant damage to your personal credit history and can hamper your ability to get credit for your company.
• Give credit cards only to employees you trust and to those who really need the cards.
• Be wary of “teaser” rates. These low rates are often introductory offers and can soon come close to 20 percent.
• Avoid using your cards for cash - the transaction fees can be high and interest begins accruing immediately.
• Determining the Type of Card Needed

Steps:

1. Purchase a corporate card for a large corporation (one with 100 or more employees).
2. Purchase a business card for a smaller business.
3. Obtain a purchasing card if you make repetitive purchases of certain items, such as office supplies. The card can reduce unnecessary paperwork. You can use the account with just an account number, not a physical card.

Applying for a Card

Steps:

1. Choose a bank or other institution. Visa and MasterCard provide links to cooperating banks on their Web sites.
2. Contact the company or bank you choose and request an application, or complete the application online.
3. Include your name, address, phone number, Social Security number, personal and business credit history, annual income and data on the profitability of the company.
4. Submit your application. Most institutions will complete the process within 10 business days.

Tips:

• It is often helpful to use existing banking relationships as leverage when applying for a business card.
• It is easier to get a card if your company has been established for 2 to 3 years, is profitable and has a good credit history.
• The largest credit card companies are Visa, MasterCard and American Express. Diner’s Club is used for travel and entertainment expenses only. American Express offers a card with no finance charge, provided you pay the balance in full monthly. The card has no preset spending limit.

Finance 2005-11-10 Home Business Tips