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Credit Card Applications » News » Products » Business Credit Cards Boost the Small-Business Boom

Business Credit Cards Boost the Small-Business Boom

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A report commissioned by American Express on the state of women business-owners says that the number of firms owned by women is growing, and that businesses headed up by women are helping to create jobs and stimulate the economy more than ever before. Even in traditionally male-run fields like warehousing and construction, women are keeping pace with men – in those fields, women-owned firms are equally likely as their male-owned counterparts to generate annual revenue of more than half a million dollars. That half-million mark is generally seen as one that is difficult for women-owned businesses to surpass.

One of the biggest challenges for any small business is finding funds to cover everything from the smallest expenses (paperclips and pencils) to the largest (laptops and lawyers). How can a small business owner afford to stay afloat, especially during the first few years, when profits may not yet keep up with expenses? More and more, business owners are turning to credit cards to help make ends meet.

Business credit cards are an invaluable tool for any business owner, offering everything from high lines of credit – even unlimited lines of credit, in some cases – to tools that track spending and help businesses manage their budgets. Perhaps most important, business credit cards offer the opportunity to earn cash back on everyday purchases, which can then be reinvested into operating expenses.

American Express, the backer of this study, is the largest issuer of corporate cards and considered a leader in the field. Let`s see how the rewards offered by two of their most popular business cards – one a credit card, the other a charge card – stack up next to a business credit card issued by Citi. We took these cards and broke down their rewards in a side-by-side comparison. Who offers the biggest rewards?

American Express Business and Citi Business Cards Review

For our study, we used the following chart to calculate the monthly expenses of a typical small business:

Monthly Expense Type

$ Amount

Airfare or Misc. Expenses

800

Utilities

300

Insurance

150

Taxes

210

Telephone

240

Auto expense

400

Supplies

100

Sales and marketing

300

Interest

100

Shipping

624

Monthly Total

$3,224

*Administrative Salaries and Rent not included in these calculations

Using that figure of $3,224, let`s see how much cash back this business would get using an American Express business credit card vs. an American Express business charge card:

Business Credit Card

Business Charge Card

American Express

American Express

Monthly Business Expense Categories

Monthly Expense:

Telephone (Wireless) = $240

  • 5% cash back on wireless services
  • Office Supplies = $100

  • 5% cash back on office supplies
  • Gas / Car Fuel = $400

  • 3% cash back on gas
  • All other expenses = $2484

  • 1% cash back on all other purchases
  • ($240 x 5%) + ($100 x 5%) + ($400 x 3%) + ($2,484 x 1%) = $46.84 Monthly cash back

    Monthly Expense:

    Airfare = $800

  • 3 points (domestic and international)
  • Advertising and Marketing = $300

  • 2 points on advertising
  • Gas / Car Fuel= $400

  • 2 points on gas
  • Shipping = $624

  • 2 points for shipping, including mail and courier costs
  • ($800 x 3) + ($300 x 2) + ($400 x 2) + ($624 x 2) = 5,048 points per month

    $46.84 per month cash back x 12 months = $ 562.08

    $ 562.08 in cash back
    (credited to statement)

    5,048 x 12 month = 60,576 points annually,

    Points can be exchanged for $605.76 in gift cards to be used at AMEX partnering merchants, or a $302.88 AMEX gift card that can be used anywhere

    Additional Info About The Card

    0% introductory APR for 6 – 12 months, based on creditworthiness, annual APR of 12.24%, 17.24% or 19.24% after that.

  • Annual Membership Fee $0
  • Cash Advance Fee – $5 or 3% of amount, whichever is greater.
  • APR for Cash Advances 21.24%
  • Foreign Transaction – 2.7%
  • Late Payment – Up to $35
  • Overlimit – No Fee
  • Returned Payment – $35
  • This is NOT a revolving line of credit – it is a charge card. All charges made on this card are due and payable as soon as you receive your statement.

  • No Annual Membership Fee for the first year, after that $175 in Transaction Fees
  • Foreign Transaction fee: 2.7% of each transaction after conversion to US dollars.
  • Late Payment fee is $35 or 2.99% of the past due amount, whichever is greater.
  • Returned payment fee: $35
  • American Express Business Cards Review Conclusion:

    SimplyCash® Business Card from American Express OPEN= $562.08 in cash back!

    The Business Gold Rewards Card® from American Express OPEN= $605.76 in Gift Cards (from AMEX partner stores)

    Now let`s review Citi Business Card Example:

    CitiBusiness World Card

    APR: Zero percent intro APR for six months; after that, you get a variable 13.24 percent APR.

    Annual Fee: None

    Foreign transaction fees: 3 percent

    Sign-up bonus: You get 10,000 bonus ThankYou Points if you spend $300 within the first three months, which is enough for a $100 gift card. Not the best bonus I`ve seen, but it`s not bad, either.

    Rewards: You earn 3 ThankYou Points for every $1 spent on purchases at certain office supply merchants and on professional services. And you earn one ThankYou Point for every $1 you spend on everything else. Plus, you can even earn ThankYou Points from purchases made on your employee accounts.

    Office Supplies: $100 x 3 = 300 ThankYou Points

    Everything Else: $ 3,124 x 1 = 3124 ThankYou Points

    3424 ThankYou Points per month x 12 month = 41088 ThankYou Points

    41,088 ThankYou Points = $273.92 Cash Back (15,000 Citi ThankYou Points = $100)

    American Express Business and Citi Business Cards Comparison Conclusion:

    It appears that in this case, American Express defends their reputation as the best of the best when it comes to business credit cards. Their SimplyCash® Business Card from American Express OPEN gives the business owner in our study $562.08 cash back over a year, while their The Business Gold Rewards Card® offers $605.76 in gift cards, although it`s worth noting that these must be spent at an American Express partner merchant. The , by comparison, only gives $273.92 cash back for our fictional business owner to reinvest in her business.

    New Business Owners Beware

    There are a couple of important things to keep in mind about the difference between a small business credit card and a personal, or consumer, credit card. The first one is that the CARD Act (Credit Card Accountability, Responsibility, and Disclosure Act) which took effect in February 2009, does not apply to business credit cards. The protections afforded by this act – a 21-day grace period, 45-day advance notice of new fees, etc. – apply only to consumer credit cards. Although this may initially sound like a drawback, people who are opening their own business presumably know how to use credit responsibly and do not necessarily need those protections.

    The other thing to keep in mind is that business credit cards do not report to the three major credit bureaus, and therefore will not have any bearing on your personal credit report. That`s great if you prefer to keep your business credit history separate from your personal credit history, but not so great if you were hoping to improve your credit score or build up your credit history by using a business credit card. And remember that as the primary card holder on your business account, you will still be personally liable if you default on the card – and that negative information will be sent to your personal credit report.

    Whether you are a man running a business out of your garage all by your lonesome or a woman commanding an army of 25 employees in a warehouse, there`s a business credit card that can help you accomplish all you dreamed of when you first sat down to write your business plan. Credit-Land.com has the tools you need to help you find a business credit card that makes your money work as hard as you do for your business.

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