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PICK A CARD, NOT ANY CARD

Suddenly, there is plastic aplenty. So choose carefully

Every month, it was the same tedious routine. Roger Hendrix, the owner of a 10-person office-equipment dealership in Monroe, N.C., had to ferret out all the business expenses on his personal credit card so that he could reimburse himself. It was a complete waste of time, so in 1994 Hendrix decided to simplify his life by getting a commercial credit card. After a brief search, he wound up with an American Express Co. charge card. ''As far as I could tell,'' he recalls, ''it was the only option out there.''

Back then, the choices were few indeed. Today, it's a different story. Credit-card issuers, which long ignored small businesses, are lavishing attention on them, thanks to a booming economy and a maturing market for personal cards. MasterCard International says the number of issuers offering small-business cards is up more than 30% in two years, with the total approaching 200.

Which card is right for you? It depends on what kind of manager you are.

If you're the type who carries a huge balance--in effect, using the card as a back-door business loan--then you want the one that charges the least interest. Just don't expect to get anything near the prime rate. While some initial teaser rates dip into single digits, it's rare to find long-term rates below 15%. ''Quite frankly, there is not as much competition in the business-card arena,'' says Michael K. Noles, general manager for Advanta Business Cards.

PERKS. But if you're using the card as a tool to run your business better--to help track expenses and simplify record-keeping while paying off the balance each month--there are a handful of national cards that will do the job at a modest cost. For good measure, they'll throw in perks such as discounts on hotels, restaurants, airfares, rental cars, overnight delivery, and office equipment (table, page 16).

Why do you need one? For starters, a commercial card is fairer to your employees, who no longer have to put company expenses on the family credit card. That's not just a matter of convenience to them; some lenders interpret a high credit-card balance as a warning signal that the person is not creditworthy. At Minneapolis-based TestWare Associates Inc., a software-testing company, an employee used his card so much for business travel that he had a hard time getting a mortgage. ''We actually had to go and write statements that said these expenses were business-related,'' says President Karen Bishop-Stone, who signed up for a commercial card shortly afterward.

As for your business, a commercial card can provide greater control over spending. Besides listing each transaction, some issuers will give you quarterly or even monthly reports that break down spending by employee, cost category, and vendor--invaluable data when it comes to budgeting.

Another intangible benefit is that a company card helps your business establish a credit history. Pay your bills regularly, and a lender is more likely to make you a traditional loan at more favorable rates, says Shelley Ehrman, vice-president for commercial-card services at NationsBank Corp. in Charlotte, N.C.

HOLD THE TWINKIES. True, there's always the risk an employee will run amok with the card at Tiffany's or simply turn out to be a deadbeat. In most cases, though, you can have his or her card pulled without canceling the entire company account. And some issuers will cover up to $15,000 in unauthorized charges.

Often, these problems can be avoided by setting limits on balances and types of expense. Some cards get even more specific. First USA Paymentech offers ''fleet cards'' designed to help manage costs on vehicles. They come with a built-in ''anti-Twinkie'' feature designed to limit what can be bought at the Mobil minimart to things that fuel the car, not the driver.

Which is the best? While no single card is right for everyone, overall cost is most likely your main concern if you carry a balance. So we ranked nationally issued cards based on an analysis giving the heaviest weight to interest rates, with lesser weight assigned to annual fees, late charges, and minimum payments.

On that basis, American Express Gold Corporate Optima is No.1. At 15.4%, it had one of the lowest rates (calculated as prime plus 6.9%), with no annual fee for up to nine cards. It comes with a teaser rate of 8.9% for six months. Discounts include 15% off Hertz car rentals and up to 20% off UPS shipping. You also get a monthly breakdown of expenses, a decided advantage over rivals that send reports only quarterly or annually.

If you run a substantial balance, though, you'll probably want the runner-up, First USA Paymentech Visa. It boasts the lowest interest rate--prime plus 6.4 points (currently 14.9%). In practice, that saves you $200 a year in interest on a $40,000 balance. Credit limits range as high as $250,000. By contrast, the Optima card tops out at $50,000. There's a $25 annual fee, but you can get a no-fee version if you expect to charge more than $10,000 a year or rack up more than $100 in finance charges. Discounts cover travel, as well as everyday items such as office supplies and business services, but your expense breakdown comes only once per quarter. (AmEx offers comparable perks on its corporate charge card, in return for a $55 annual fee, but you're not allowed to carry a balance.)

That's a far cry from the skimpy small-business offerings of a just a few years ago. Clearly, the issuers are finally giving credit where credit is due.

By Mie-Yun Lee, editorial director of BuyersZone (www.buyerszone.com), in Boston



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TABLE: What's in the Cards, Part 1

TABLE: What's in the Cards, Part 2


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