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Choosing a Business Credit Card: Annual Fee or No Annual Fee?

December 20, 2021

Considering the abundance of business credit cards available without annual fees, it might seem counterintuitive to pay for the use of a credit card.

Annual fees can give business owners many opportunities to save money on everyday expenses and offer perks and benefits worth more than the cost of ownership.

To decide if a business credit card with an annual fee is right for you, Fund&Grow advises our clients to consider their lifestyle and how they manage their credit. Doing so allows you to determine if you can sustain the required upkeep and make full use of its benefits and perks. 

Benefits of having a business credit card with an annual fee 

Welcome bonuses

Welcome bonuses are quite the incentive to take advantage of a business credit card with an annual fee, and often the reward is worth the cost.

For example, the American Express Business Gold Card offers 70,000 Membership Rewards points after spending $10,000 on eligible purchases using the card within the first three months of Card Membership.

Travel benefits

Additionally, many cards will offer ongoing benefits and memberships for cardholders, including travel and hotel cards, which often work great for Fund&Grow clients who travel regularly.

Travel cards may offer perks such as mileage rewards points for purchases, airport lounge access, and free checked baggage.

On the other hand, hotel cards may offer room upgrades or late check-out.

The higher your annual fee is, the more perks and benefits you have.

For instance, the CitiBusiness/AAdvantage Airlines Platinum Select Mastercard charges a $99 annual fee (the first 12 months are free) and offers cardholders:

  • 65,000 American Airlines AAdvantage bonus miles after spending $4,000 within the first four months of the account opening
  • One free checked bag on domestic flights with American Airlines
  • 25% savings on inflight Wi-Fi
  • Preferred boarding access
  • Earn 2 AAdvantage miles for every $1 spent on eligible American Airlines Purchases
  • Earn 2 AAdvantage miles for every $1 spent on purchases, including telecommunications merchants, cable and satellite providers, car rental merchants, and gas stations
  • Earn 1 AAdvantage mile for every $1 spent on other purchases

These upgrades and money-saving perks will more than pay the annual fee for someone who travels frequently.

Renewal offers

Many credit issuers will offer bonuses for renewing your card membership annually.

Some will deposit rewards points into your account, free airline tickets, or a free night in a hotel.

These perks can sum up to hundreds of dollars saved, making the $95 annual fee seem minuscule.

Fortunately, annual fees do not only benefit frequent flyers and travelers, but some cards offer significant rewards for everyday purchases, which are popular with Fund&Grow clients.

The Capital One Spark Cash Plus Business Credit Card offers a plethora of benefits to its cardholders, including:

  • Earn up to $1,000 cash bonus by spending $5,000 in the first three months and $50,000 in the first six months after account opening.
  • Earn unlimited 2% cashback on every purchase.
  • Earn an annual $200 cash bonus every year you spend $200,000 or more.
  • Add employee cards for free and earn unlimited 2% cashback from their purchases.

If you only spend $5,000 in the first three months, you have already paid for this card’s $150 annual fee in addition to having some extra cash to pocket, proving this card to be worthwhile.

How to know if a business credit card with an annual fee is right for you

To reap the maximum benefit from a card with an annual fee, it must make sense for you and your business. Some easy ways to tell if it is a good fit for you are:

  • You are confident with managing the cards you already have- Cards with annual fees often require some upkeep. Depending on the card, you may be required to spend a certain amount in specific categories to reap the benefits and receive the welcome offer. You may also be required to follow steps to redeem your rewards points and ensure any perks or subscription discounts are activated.
  • The perks matter to you and benefit you- All the perks in the world are pointless if it does not benefit or matter to you. If you do not travel often, you will have no benefit from a travel or hotel card, so it will not be worth the annual fee. Find a card that best fits your lifestyle and business operations to avoid feeling like you are paying for perks you do not need.
  • The perks do not require you to change your lifestyle or business operations- Welcome bonuses usually require a certain amount to be spent to make the offer claimable. If you do not spend that much monthly on your credit card, you are forcing yourself to take on unnecessary debt to take advantage of the card, which is not advisable. If you have a big family or spend a lot of money at the supermarket to keep your break room stocked, a card that prioritizes supermarket cashback rewards would be best suited for you. If your work requires you to travel often and book regular flights, you should prioritize a travel or hotel card.
  • You gain value by using the card- If the value and cashback you receive do not offset or exceed the cost of owning the card, the card is not for you.

The purpose of an annual fee is to provide value to the cardholder, so Fund&Grow advises clients that if a business credit card’s annual fee fails to add value to you or your business, it is best to consider other options or a card without one.

As long as you remember that while sorting through the bundled benefits the card has to offer, you will be well on your way to choosing the best business credit card for you – with or without an annual fee.

 

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