Business Credit Cards Explained
What is a Business Credit Card?
Just as a business loan is different from a personal loan, a business credit card is also different from your personal credit card. While they are functionally the same in that they both draw from a line of credit, a business credit card is used to finance your business expenses.
Benefits of a Business Credit Card
Business credits cards come with perks and rewards that are specialized for business owners rather than for general use. These benefits may be canceled if the card owner uses his business credit card on personal expenses, so it is of paramount importance to keep your personal and business finances separate.
While a business credit card can be used for personal expenses, you should avoid doing so. Instead, a business credit card should be used to fund business expenses, such as broadband bills, or a company car and its gas bill.
Benefits that come with using a business credit card include having free subscriptions to business services, discounts on business expenses such as company dinners or travel, as well as having a higher credit limit than you would with a personal credit card. Business credit cards can also be given to employees often for no extra cost, although you do have to be careful which employees can be trusted with such privilege.
Things to Note
Business credit cards offer a way to build your business’s credit score, as card issuers will report to commercial credit bureaus. A few card issuers may also report to consumer credit bureaus, so pay attention to the terms and conditions for your agreement.
Another thing to note is that business credit cards do not offer the same protections as personal credit cards. While most issuers will offer similar protections, issuers are not legally obligated to do so. Be careful when considering your business credit card issuer.
How to Get a Business Credit Card
Before you consider applying for a business card, make sure to read the fine print and properly understand the terms and conditions. Some cards will offer a 0% introductory APR period, where you can roll over debt without added interest, while others may offer other welcome bonuses. Some cards will also have an annual fee that must be paid but may also come with great benefits that may be worth the tradeoff, such as no foreign transaction fees.
Your credit score, both business and personal, will determine the range of business credit cards available to you. For example, there are cards for small business owners with average credit and cards that require a personal guarantee from you in the event of a default.
For the business credit card application itself, the application will often be straightforward and simple, but you will want to make sure that you do not make any clerical errors. While your personal credit score will be considered, most of the information you provide should be specifically for your business. However, if you are a sole proprietor, then you will not need an Employer Identification Number and can instead use your Social Security Number.
Usually, the application approval process will be done within a day.
A business credit card can be an essential component of your business. A business credit card can come with many benefits, from building your business credit history, enabling you to keep personal and business expenses separate, and various perks depending on your choice of card.
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