Dear Business Banter,
I have a personal Capital One card and they are offering me a Spark card. Is it better to stay with one credit company or get one from a different credit company? I’ve been following you for a long time and I appreciate the advice you give! Thank you. – Catherine
As you just discovered, establishing a positive history with a credit card issuer has its benefits. The relationship you formed with Capital One created a valuable level of trust, and now the company is interested in extending you another account. You wouldn’t be switching credit cards within the same bank, but adding another card to the one you currently have.
There are a few advantages to having a personal and a business credit card with the same issuer. Rather than switch your credit card to a different bank, you would already be in the existing bank’s system. It’s also convenient to have all of your accounts in one place.
Account management would be streamlined, so you would just have to visit one website or app to monitor activity and pay bills. You would also have a continued and deepening relationship with the company. With a strong background of handling both a personal and a business card responsibly, the bank may be more prone to give you a break should you ever get into financial trouble and request some assistance.
That said, I don’t think you should limit yourself to just a single bank. Forming excellent relationships with multiple card issuers is also beneficial. I recommend reviewing many accounts from the wide span of credit card issuers before making a decision. In general, a healthy plastic portfolio for business needs would include the following.
See related: What to know before switching credit cards
Rewards business credit card options
Each business credit card has its own unique rewards program. If you can handle a couple of cards, go for it. With some accounts, you will earn cash back as you spend and with others, you’ll rack up points or miles (so you might want to have one of each).
For example, you could get the Capital One Spark Cash for Business (This card is no longer available) for cash back and a Chase Ink Business Preferred Credit Card for travel rewards. With each card, you will earn rewards for different activity and at a different rate, so your bases will always be covered.
Having a few credit cards at your disposal will also help with unexpected costs that inevitably arise in a small business. Each credit card will have a fixed credit limit, so numerous accounts will give you more access to capital.
Business credit cards are great for the things you need to buy and then repay within the interest free grace period (about 30 days), but you also have the option to revolve the debt and then repay the balance in small monthly increments.
See related: Best small business credit cards of 2022
A business charge card
Charge cards differ from credit cards because they have no or extremely high fixed spending limits. Therefore, you can pay for items and services that have particularly high price points without having to dip into your savings or use some other form of credit.
With a charge card, you will need to repay the balance in full at the end of the repayment period, which is typically 30 days. No interest will be added, so you won’t have to worry about finance fees increasing the cost and eating into your profit margin. This makes charge cards terrific payment tools for costly yet necessary items that you can pay for quickly. The rewards programs for these products are usually excellent, too. If you consistently charge and repay, you’ll come out ahead financially, even with the annual fees.
American Express is the primary issuer of charge cards, and there are a number from which to choose. For example, the American Express® Business Gold Card is a classic charge card that would enable you to accumulate points for travel and purchases through its shopping portal, and you would you have 30 days to pay in full. On the other hand, The Plum Card® from American Express gives two months to delete the balance, as long as you pay the minimum in the first month, making it a little more flexible.
Know how to switch credit cards without hurting your credit score
Each time you apply for a credit or charge card, the issuer will notify the credit reporting agencies and a hard inquiry will appear on your credit report. These inquiries are factored into your credit scores, so you’ll want to be prudent with your applications.
An overabundance of them will cause your credit scores to decline. Only pursue the cards that you truly want and for which you qualify. Business cards tend to demand high credit scores, so if your scores need a little work, take the time to hike them up.
Moreover, each new account you get will dilute your credit history for a while. You may see your credit scores decline a little in the beginning. Don’t panic, though. The more you use a healthy mix of credit accounts, while keeping balances low and paying on time, the faster your scores will escalate.
In the end, this is not a question of switching banks or cards, but adding to them in order to strengthen your overall credit health.