Business Credit Cards

If you own a small business, a regular consumer credit card many not be the best option for you.

 

Instead, you might benefit more from a business credit card catered to the circumstances and needs of a small business. One advantage of business credit cards over personal cards, for example, is they often have higher credit limits. Even if your personal credit score and history do not qualify you for such a high credit limit on your personal use credit cards, you can still get a high credit limit if your business’s credit history is clean and its assets are considered suitable.

A business credit card is also useful if your business has no credit at all and is trying to build some. This is just one of the many advantages of a business credit card for a small business owner. Picking the right business credit card is quite similar to picking the right personal credit card. You need to compare interest rates, fees, bonuses and rewards and other features. It helps, however, to be aware of the features, benefits and restrictions common to business cards and distinct from personal cards so you know what to look for. These include, among other factors, taxes, credit reporting and consumer protections.

Rewards and Benefits

Oftentimes, the rewards on a business credit card will be different than the rewards offered on a personal credit card, including how those rewards can be earned. For example, business cards often come with bonuses for purchases made on such business-oriented products and services, such as Wi-Fi, office supplies, telephone bills, advertising and shipping. Since a business typically spends more heavily on these things than a general consumer, these types of bonuses can add up to quick and hefty rewards for business owners. The rewards you earn on a business card can then be spent in ways often different from those on a personal card.

Both types of cards may offer travel rewards, for example, but the rewards exchange rates for travel or other travel rewards perks may be better for business cardholders than for personal cardholders. Like all other credit cards, however, some rewards are ongoing and some are temporarily offered as a promotion to get you to apply. Make sure you know what type of reward you are researching. If it is only temporary, make sure it is enticing enough to justify still applying. Even better, focus more on permanent features, benefits and rewards than temporary, promotional ones, and you will be much more likely to pick the best card for your business.

Other business card benefits tailored specifically to businesses, as opposed to consumers, include free employee cards to distribute to your staff in order to let them to make purchases for the business. With many business cards, you can even monitor the spending of individual employee cardholders and implement controls for where the card can be used and how much can be spent on it.

Taxes

If you use your personal credit card for business expenses, you are supposed to use it exclusively for business expenses and only pay balances due on that card with business money. Moreover, you may need to be able to prove this during tax filing or auditing time. If, instead, you use an individual personal credit card for both business and personal expenses, you may disqualify yourself from the personal liability protections extended under your personal card’s terms and conditions. Having a business card keeps tax filing and accounting much simpler. The business card tracks all your business expenses and is paid from your business’s bank account, and your personal card tracks all your personal expenses and is paid from your personal bank account.

Credit Reporting

Purchase and payment activities on a business card are reported on the business’s credit, under its Federal EIN, rather than your personal credit, under your Social Security number. The exception to this is if a business card issuer has you sign a personal guarantee for credit. In this case, you are personally liable for any debt your business accrues with the issuer and, if the business goes into default, your credit could get flagged in addition to that of the business. Some credit card issuers report both positive and negative activity to both business and personal credit bureaus. Others report both positive and negative activity only to the business credit bureaus and report only negative activity to the personal credit bureaus. Any business activity reported on your personal credit reports will factor into your credit scores from FICO and elsewhere.

 

Moreover, if the business’s credit card debt goes to collection, the credit collectors can come after you personally, in addition to the business. In this case, the business shutting its doors or declaring bankruptcy would still not protect you from continued liability for the debt. Your personal credit score might also be factored heavily into the equation when a credit card issuer is deciding whether or not to grant you credit.

Consumer Protections

Be aware that business credit cards are not covered by the same legal consumer protections as consumer credit cards. The Credit CARD Act of 2009 and other consumer protection laws protect consumers from credit card companies suddenly changing their APRs or charging unreasonable fees. Credit card issuers are not legally bound, however, to provide these same protections to business cardholders. Many credit card providers choose to extend some degree of consumer protections to small business owners as a courtesy. Therefore, when you look for a business credit card, you should not have difficulty finding a suitable card that also comes with consumer protection. Just do not assume a business card you are considering offers it. Read the fine print to find out and try to choose a business card that does offer such protections. If, on the other hand, you choose one that does not, just do so knowingly and with good reason.

Some of the best credit cards for small businesses, based on reviews and comparisons, include:

  • Chase Ink Business Preferred
  • Chase Ink Business Cash Credit Card
  • American Express Platinum
  • Capital One SPARK Cash

 

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