More credit card issuers target small businesses
By Jim Hopkins
USA Today
SAN FRANCISCO — Small-business owners face an onslaught of choices as companies blitz them with new credit card offers.
American Express just launched a cash-back card aimed at small companies. Visa this month is rolling out a card targeting small businesses with big appetites — those spending $25,000 or more a year. Discover entered the market for the first time this past summer.
Business owners should move cautiously, just as they would when shopping for a personal credit card. Rock-bottom interest rates can jump after the introductory period ends. They often soar, too, if owners make a late payment. Cash-back rewards may sound like great money savers, but not if you carry a balance subject to high interest.
Marketers smell opportunity in the 90 percent or more of small-business spending not on credit cards — up to $4.8 trillion a year, says Visa.
The surging interest in small companies comes as the corporate market is pinched. Growth in the number of big employers — those with 500 or more workers — has been flat since the end of the 2001 recession. There are now about 17,000, the latest Small Business Administration data show. In the same period, the number of small employers grew 4 percent, to 5.9 million.
"Small-business growth has been tremendous," says Tracey Mills, a spokeswoman for the American Bankers Association, a trade group whose members are among the biggest card issuers.
Card companies are targeting growth-oriented entrepreneurs such as Jenny Schmitt, who early last year launched CloudSpark, a public relations and marketing agency in Atlanta.
Although she is CloudSpark's sole employee, Schmitt retains seven independent contractors and hopes to add her first full-time staffer next year. She spends up to $12,000 annually on a personal credit card for technology and other goods, such as research services to find publications that might showcase her clients.
Schmitt plans to get a business credit card next year. In the past six months, she's seen a jump in the number of unsolicited business card offers mailed to her. Schmitt says she has good credit. Yet, she's been taken aback by how much credit — up to $40,000 — marketers are willing to extend.
"These people don't know me ... from Adam," she says.
Here's what Schmitt and other small-business owners should consider:
Charging $10,000 worth of hardware and software, then paying it off over several months? That's reason to look for cards with fixed rates, rather than variable rates that rise with broader short-term interest rates.
