Never Ignore These Business Credit Card Fees

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A credit card can be an asset to your small business’s finances. But read on for a few pesky fees that are best avoided. [[{“value”:”

Opening a credit card account for your small business can be a really good move. You can take advantage of perks like getting to keep your personal and business spending separated (a big help at tax time), establishing good credit for your business, and having a new way to manage your cash flow.

But it’s not all sunshine and roses with business credit cards — some of them charge fees that are worth your consideration before applying for the card in question. Let’s take a closer look at a few fees your credit card might charge — and how to avoid them.

Foreign transaction fees

If you ever use your credit card in other countries, or even use it to pay suppliers overseas, here’s one to watch out for. Foreign transaction fees are charged to cover the cost of processing payments using banks in other countries, and they often amount to around 3% of the transaction amount.

Paying an additional 3% to your credit card company on top of what you’ve charged has the potential to make your business expenses more costly, so this is definitely a fee best avoided. If you do business with clients or companies in other countries, make sure you select a card that doesn’t charge for that.

Late fees and penalty APRs

Just like personal credit cards, business credit cards have the potential to cost you a lot of money if you don’t keep up with payments (and ideally, pay off your entire balance every month). Some cards even require payment in full, and if you carry a balance, you’ll be charged a late fee as a percentage of it.

Others will charge a penalty APR if you pay late, and since the going rate on a credit card averages more than 20%, a penalty APR can come in closer to 30%. If there’s any chance that you’ll be carrying a balance from month to month, investigate the go-to and penalty APRs for any card you’re considering — and avoid cards that are designated as “pay in full.”

Annual fees

Finally, you don’t want to ignore an annual fee on any business credit card you’re considering. In some cases, paying an annual fee for a credit card (be it business or personal) can make sense. Cards with an annual fee usually pay a higher percentage of cash back or rewards on your spending — and they also often come with more valuable welcome bonuses and other useful fringe benefits, like purchase protection or cellphone insurance.

If you’re just getting your business off the ground, however, it might be a good idea to stick with no annual fee cards, at least to start with. The Motley Fool’s Ascent’s list of the best business credit cards features a few with no annual fee, and these still offer decent rewards rates (like 1.5% cash back across the board) and bonus categories that might be really useful for you, like office supply stores and internet service.

Is your business eligible for a credit card?

If you’re a sole proprietor like I am (freelance writer and editor, party of one), you might assume that you’re not allowed to open a business credit card. You’d be wrong, though! Even if your business consists of evening and weekend gig work (like driving for Uber) alongside a full-time W-2 job, you have access to these cards.

You can qualify using your own Social Security number — and just like with personal credit cards, the better shape you’re in financially, the better your odds of approval for a great card. Just take the time to assess all the fees you could be subject to if you get a business credit card — some of them have the potential to make using the card a lot more expensive.

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The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.The Motley Fool has positions in and recommends Uber Technologies. The Motley Fool has a disclosure policy.

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