Credit card companies are aggressively pushing a new kind of plastic, the “small business” card.
There have been several offerings from big names, including Discover and American Express. Recently, JPMorgan Chase introduced a Visa-branded card aimed at contractors, plumbers and landscapers.
When they say “small,” they mean it: The cards are targeted at even the tiniest two-person or three-person enterprises, up to firms with a few million dollars in annual revenue.
Driving this push: Growth in the consumer credit card business is slowing, but small businesses are one of the remaining untapped areas for plastic. Just one in four small businesses use a business-related card, according to Advanta, a Spring House, Pa., company specializing in small-business plastic. Last year, Advanta started offering a card embossed with a cardholder’s corporate logo.
Often, small businesses make do with a personal credit card. But small-business cards can simplify bookkeeping and tax issues while racking up rewards points on staff expenses, although they aren’t for everyone.
For starters, don’t even bother if you can’t handle the debt on your personal plastic. Late fees and finance charges can add up quickly.
A recent study by the National Small Business Association found that 71 percent of small-business owners carry a monthly balance. For a big capital expense, it could be cheaper and wiser to get a traditional bank loan.
The cards are best suited for companies too small to handle the bookkeeping demands of expense management. When employees entertain clients or pick up office supplies on the way to work, it can be time-consuming to collect receipts and cut expense checks.
People who run small companies also can find it more efficient from a tax standpoint to separate business and personal spending.
In general, the cards carry rewards programs similar to those of many consumer cards. Cardholders can earn cash back, travel rewards and gasoline discounts.
But perks vary widely. A card introduced last year by Discover Financial Services, a unit of Morgan Stanley, lets holders write special checks that count as credit-card transactions, making it easier to use the card to pay the many vendors that don’t accept plastic.
At Bank of America, which has several small-business cards, if the primary cardholder also has a banking relationship with Bank of America, card information can be combined with account data and rolled into one monthly report.
In 2004, American Express introduced an “open savings” program that gives cardholders automatic discounts at specific merchants, such as FedEx Kinko’s.
And JPMorgan’s new card, the one aimed at contractors, provides 60-day interest-free financing for purchases of construction materials of $1,000 or more.
