Business credit cards are a great tool for entrepreneurs looking to manage cash flow and earn rewards. However, all those benefits can come with hefty business credit card fees. Learning how to understand and navigate these fees can help avoid unnecessary costs while maximizing your credit card’s potential.
Tip 1: Understand the most common business credit card fees.
If you look at any credit card’s terms and conditions, you’ll see a list of possible fees you may incur. Many of them are totally avoidable, and others may be negotiable.
Annual fees
In general, business credit cards that charge annual fees also offer more valuable perks, benefits and rewards than cards with no annual fee. There are different card levels, as well; some may charge around $100 per year, others are closer to $300 and still others may be $500 or more.
Whether or not the fee is worth it depends on how often you plan to use the card. If you can comfortably say you’ll earn enough points with your purchases to cancel out the fee, it’s worth the upfront cost. Big spenders who pay their balances in full each month, for instance, are best positioned to get the most out of annual fee cards (or rewards cards in general).
Late fees
A 2023 Consumer Reports study revealed that 1 in 5 American consumers paid a credit card late fee within the 12 months prior to the survey. Although late fees on business credit cards are common, it’s within your control to avoid them. Just pay the minimum amount due by the due date and you won’t be assessed a late fee. If you do miss a payment, credit card late fees on business credit cards can go as high as $49.
Returned payment fee
If you make a payment and you have insufficient funds (e.g., you bounce a check), many credit card issuers charge a fee (though not all do).
Foreign transaction fees
If you plan to take international business trips, choosing a business credit card with no foreign transaction fees can save you money. Otherwise, many cards charge around 3% on foreign transactions, which can quickly add up.
Balance transfer fees
If your business credit card has a balance transfer offer, there will usually be a 3% to 5% balance transfer fee assessed on the balance amount that you move.
Cash advance fees
Taking a cash advance from your credit line can be costly. First, you’ll incur a cash advance fee, usually around 5%. Then, depending on the card, the cash advance balance will usually have a higher annual percentage rate (APR), which will remain until it’s paid back.
Additional card fees
If you plan to add employee cards to your business credit card account, beware of this other potential fee. Some cards charge a fee per additional card, while others provide free cards. Typically, the more premium business credit cards are more likely to charge for employee cards.
Tip 2: Leverage rewards to offset fees.
If you choose a business card with an annual fee, you could think of that cost as an investment you’re trying to get a return on. The best way to do that is by taking advantage of the card’s rewards program and additional perks.
Start by qualifying for the welcome offer (if applicable), as those could provide a few hundred dollars in value. Next, look at the rewards program, which might offer cash back or bonus points for spending in particular categories, to see if it aligns with your spending habits.
Here’s an example: Let’s say you are interested in a business credit card with a $300 annual fee. The main question to ask yourself is whether you will be able to get more than $300 in value from that card each year. Some quick calculations can help you determine if that’s the case.
Let’s say the card offers 4 points per dollar spent on dining and transit, and you know you spend at least $500 a month in those categories — that’s already $240 in value back in your pocket. But then the card may also offer a $100 annual travel credit, another $100 rideshare credit, no foreign transaction fees and other perks. If those are benefits you will use, it can be fairly easy to come out ahead.
Tip 3: Try negotiating for fee waivers or reductions.
If you are a good customer who makes timely payments and has a track record of responsible account management, you may have some negotiating power when it comes to fees. For example, if you inadvertently miss a credit card payment due date and call the issuer right away, asking them to waive the fee, there’s a good chance they will. This is a courtesy that may only be extended once, however.
Annual fees are harder to negotiate, but it doesn’t hurt to call your issuer to ask. Again, having a strong customer record may help your case. Or, you might mention that you’re thinking of switching to another card — they may offer to waive your fee to keep you as a customer. Even if you aren’t successful, the card issuer may offer a different perk to appease you, such as bonus points or a lower APR.
Tip 4: Take actionable steps to avoid fees.
If you pay your bill on time without fail and with a reliable payment method, you’ll never be charged a late fee or a returned payment fee. Try setting up automatic payments for at least the minimum amount due. That way, even if life gets in the way and you forget to pay the bill, you won’t get hit with a late fee.
Balance transfers and cash advances are optional services that both charge fees. If you don’t use those services, those fees will never impact you. For balance transfers, however, you may find that the fee is worth it, especially if the card is offering 0% APR on transferred funds. Cash advances are always costly and should be avoided if possible.
As for an annual fee, there are many business credit cards that don’t charge a fee at all, some of which still offer solid rewards programs and benefits. Though remember, paying an annual fee could be worth it if you’re able to maximize that card’s rewards and perks.
Tip 5: Get familiar with your business credit cards’ features.
You can’t avoid fees or take advantage of perks if you don’t know what they are. Familiarize yourself with your card’s fine print, then put systems in place to avoid unnecessary charges. Whether it’s making sure you take a card that waives foreign transaction fees while traveling abroad or setting reminders for specific cash-back categories, knowing the ins and outs of your card is the best way to maximize your return.
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