Pros and Cons of Business Credit Cards: Why I’m Switching

Written by Chelsea Baldwin on May 2, 2017

When Brooklyn banker John Biggins introduced the first credit card in 1946 called “Charg-It,” the appeal was: Use the card to pay for items you didn’t have the cash for yet. For consumers accustomed to scrimping and saving until they had every penny needed to make a purchase, this was a game changer.

But it didn’t take long for credit cards to switch from consumer use to business use. Today, even some small-time business owners weigh the pros and cons of business credit cards and opt to use credit card debt as their business “loans” instead of jumping through all the hoops of getting a bank loan — because it’s easier, faster and simpler to implement.

Businesses that aren’t in the just-getting-started phase are also huge fans of credit cards. A lot of small business owners, like me, will pay for resources they need with credit cards, even if they have the cash to pay for them. Why? Beyond the initial allure from the 1940s, credit card companies have evolved to offering their customers a slew of benefits beyond delayed payment, including:

  • Cash back
  • Free travel
  • Free hotel rooms
  • Free rental cars
  • Discounts with retail partners

When you receive benefits, like a free flight, just for using a credit card to buy something you were going to buy anyway, getting a business credit card is a no-brainer for freelancers who want to make their money stretch as far as possible.

Pros and Cons of Business Credit Cards

The truth is almost every business credit card you sign up for will promise you either cash back, free travel points or a combination of both. Though they promise the same thing, it doesn’t necessarily mean they’re equally valuable — in fact, it’s just the opposite. A sad but true lesson: Not all credit cards are created equally.

I’ve yet to become an expert at identifying the best credit cards to use, but while comparing my business credit cards throughout the years to my personal credit card of choice, I can see some are clearly better than others. My personal credit card, for example, takes every dollar I spend and translates it into one point for the airline of my choice. It’s easy and straightforward, and the points transfer automatically. I pay a small yearly fee, but I also haven’t paid for a single plane ticket in the last two years, so it’s 100 percent worth it.

But when it comes to the business credit cards I’ve tried, that’s not the case. One credit card I used told me I’d receive one point for every dollar spent, so I assumed it’d be a one-to-one trade for credit card points to airline points, but I was wrong. Instead, I spent 1,000 credit card points for 200–250 airline points. Needless to say, I was a little disappointed.

One credit card did give me a one-to-one exchange for “travel” points, but it turned out those points were only good for super-expensive hotel rooms. For me, this was even less useful, because I’m the kind of traveler who prefers lively hostels and Airbnb rooms to swanky hotels. I never really used those points.

Finally, the credit card I have now told me it offered travel points, with its exclusive-feeling marketing for business travelers. I was excited to sign up, since it’s in my plans to travel more for work, but fast-forward to me trying to transfer those points over to my airline, when I realized all the points I worked hard to collect couldn’t transfer to airline points. They could only be spent as “cash” when I booked through that credit card’s travel-booking interface. All this red tape meant I couldn’t combine it with my other travel points. Disappointing doesn’t even cover it.

In Search of Better Benefits — and a Warning

Needless to say, I’m in the market for another new business credit card. Truth be told, I’m actually thinking about signing up for a card with a $100 yearly fee, because from what I can tell, those benefit programs work the way I want them to. Plus, most fees are waived for the first year, giving me enough time to test it out to see if I really like the card and how the rewards work.

But here’s the clincher, and why — despite my dislike for my current credit card’s reward system — I haven’t switched yet: When you open and close different lines of credit, it affects your credit score.

I’m fortunate to have a great credit score, which usually falls in the 760–780 range. Having a few lines of credit (if you’re responsible with them) can actually boost your credit score. The longer each line of credit stays open and is healthy (read: you’re paying bills on time), the better your credit score becomes, because lenders know they can trust you. If you’re regularly closing lines of credit, your credit score will take a hit.

This is why it’s so important to do as I say here, not as I’ve done. I noticed my credit score go down after closing a credit card account, even after having that account for a few years. I’ve recently discovered the site Cards for Travel, which gives a comprehensive review of different credit cards and their reward programs from people who’ve been there and done it. I used it to narrow down what my next business credit card will be, so hopefully, I won’t have to deal with switching again.

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