6 Questions to Ask Before You Get a Business Credit Card With an Annual Fee

6 Questions to Ask Before You Get a Business Credit Card With an Annual Fee

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When you are looking for a credit card for your business, many of the options you find will have an annual fee. These fees can range from relatively minor amounts of just under $100 to premium rewards cards that cost hundreds of dollars each year (but come with some pretty incredible perks).

For many business owners, every dollar counts, and you might not want to pay an annual fee to have a credit card. Yet being a business owner is all about paying for goods and services that add value to your company, and a credit card is no different.

Before you get a credit card with no annual fee, consider these six questions.

1. Is the Annual Fee Waived the First Year?  

Thankfully, many credit cards will have their first year’s annual fee waived. This gives you the opportunity to try the card for a year, and then decide if it’s worth renewing.

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2. Is There a No-Fee Alternative?

Most issuers’ business credit cards offer some cards that come with an annual fee, and some that don’t. Before going with a card that has an annual fee, you can look at which cards are offered without a fee. Typically, cards with annual fees will offer more generous rewards and benefits than the ones with no annual fee. Which brings up the next question:

3. Do the Rewards & Benefits Justify the Annual Fee?

Like any purchase your company makes, you always want to see what the ration of costs to benefits are. When it comes to earning rewards with your credit card, this can be fairly straightforward math. For example, if a card with an annual fee offers twice the rewards of one without a fee, then you can easily calculate the benefit of having this card relative to its annual fee. And for perks like Global Entry credit and access to airport lounges, there are set prices for these that can be used to determine value.

However, it can be a bit more difficult to put a number on the value of some benefits, such as priority security line access at the airport, or additional travel insurance and purchase protection policies.

4. Can Your Annual Fee Be a Tax Deduction?

Like any other business expense, the annual fees you pay for your credit card are likely to be considered a tax deduction. But to be sure, check with your accountant or tax preparer. However, the rewards you earn from your business credit cards are treated like a discount on a purchase, and are not considered to be a taxable expenses. Keep these two things in mind when you consider the cost of a credit card’s annual fee, and the value of its rewards.

5. Can a Card With an Even Higher Annual Fee Be Worth It?

Successful business owners are always looking for ways to cut their expenses, but you can often get more value from a credit card that has a higher annual fee. Not only can you get increased rewards, but you may also receive benefits that have a tangible value.

For example, the Gold Delta SkyMiles Business credit card from American Express has an annual fee of $0 introductory annual fee for the first year, then $95. It offers rewards in the form of Delta SkyMiles and benefits such as a free checked bag. However, American Express offers a Platinum Delta SkyMiles business card with all of the same features, plus a companion airfare certificate good each year when you renew your card. This certificate allows you to book an additional flight at no cost (other than government taxes and fees) on a roundtrip, economy class flight in the contiguous 48 states. This card has an annual fee of $195, but this certificate can easily be worth more than twice that amount.

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6. What’s My Credit Status?

If you have a bad credit score, securing any credit card can prove tricky. Annual fee business credit cards tend to require a good (or fair) credit score in order to get approved, though there are exceptions. Most business credit card issuers use your personal credit scores for the application process (you can see how that breaks down by issuer here), though they can report your payment history and how you manage your card to the business credit reporting agencies. You can check your personal and business credit scores for free on Nav.com.

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About the Author — Jason Steele is an expert in the credit card industry. He is frequently quoted in national media and his work is regularly featured by mainstream outlets such as Yahoo! Finance, MSN Money, and Business Insider.

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