Card issuers are really rolling out the red carpet for their business customers, but is there a catch? Not if you act responsibly.

REMEMBER WHEN THE KIDS PICKED teams back in grade school, and all the captains fought for the school's star athlete? Well, guess what? In the game of business credit cards, it's you the big three are fighting for.

Though American Express, MasterCard and Visa once viewed small businesses as risky bets, they're now aggressively courting you with low introductory rates and perks like vendor discounts, reward programs and consulting services. In fact, there's never been a better time to become a cardholder, says Robert McKinley, CEO of Frederick, Maryland-based Ram Research Group Ltd., which produces the bank card publication CardTrak. "The competition has geared up so much in the business card area that you can benefit immensely from gathering points and miles," he says. "So in addition to building a credit record for the business and helping to separate personal and business expenses, business owners can generate a lot of extra value."

Losing Interest

What's the catch? Well, credit card companies aren't exactly charitable institutions--far from it. So the promise of free airline tickets and 10 percent discounts on office supplies are proffered in the hope that new accounts will prove lucrative either by bringing in fees or, better yet, interest on unpaid balances. And in many cases, they do just that. Approximately 24 percent of small and midsized businesses that use credit cards carry a balance from month to month, according to a 2000 survey by Arthur Andersen's Enterprise Group and National Small Business United. With those attractive introductory interest rates of 3.9 percent shooting up to 13 percent or higher after the six-month grace period, that's no bargain.

But for entrepreneurs who have the discipline--and the cash flow--to pay in full each month, today's business cards combine a convenient method of payment with practical accounting advantages and useful ancillary benefits. While some of the standard features, such as rental car insurance and reward programs, echo those available with consumer cards, others are tailored to the needs of businesses. For example, American Express, MasterCard and Visa business cards all offer annual and quarterly purchase summaries, fraud programs that protect business owners against employee misuse, credit limits as high as $100,000, online account management, and discounts on business services such as shipping, car rentals and computer equipment.

Pick a Card, but Not Just Any Card

Yet interest, fees, credit limits and benefit specifics do vary somewhat by card brand, and, in the case of MasterCard and Visa, by issuing bank-- which means business owners need to do their homework. "They should shop around for the program that best suits their needs," advises Craig Card, vice president of small-business products and services for Foster City, California-based Visa USA. "Do they want miles for dollars spent, or are they most interested in a low interest rate or the balance transfer option?"

"You have to read the fine print on some reward programs," adds Steve Abrams, senior vice president of Purchase, New York-based MasterCard Corporate Payment Solutions, pointing out that many free airline ticket offers come with prohibitive blackout periods. "And shopping around by financial institution isn't a bad idea-- a lot of programs offer very good discounts on annual percentage rates."

Discounts on business products and services and other offerings can also factor into your card choice. "There's lots of additional content to consider, such as everyday savings offers, general business advice and the availability of things like working capital lines of credit and installment loans," says Richard Tambor, senior vice president and general manager at New York City-based American Express Business Finance.

Ideally, you'll also want a card that will help your business build a credit history. But be forewarned: Unless you've been in business at least two years, McKinley says, issuers will typically want to hang the account on your personal credit, which means you may be liable in the event the account defaults.

Fortunately, thanks to new offerings, business owners who balk at the idea of letting their businesses influence their personal credit ratings now have other options, such as debit cards or secured cards. With Wells Fargo's Business Secured MasterCard, for example, you deposit funds in an FDIC-insured savings account and receive a multiple of the account balance in available credit. "It's a first step toward qualifying for other credit opportunities," says Abrams.

A similar step-up program by Visa offers a charge card with a credit limit that initially must be paid off in full every 30 days. Three months of timely payments wins the business a higher limit and a revolving line of credit.

This careful nurturing comes with a purpose--the card issuers are well aware that businesses, unlike consumers, tend to be loyal to financial institutions once they forge relationships with them. That means it's important to be picky early on. "There's no best business card," says McKinley, "but there is one that's best for you--you just have to take the time to weigh out what best suits you and your company."

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