Business Credit Cards

There are many different types of credit cards with terms and conditions that are easy to understand.

However, many consumers do not understand the terms and conditions of a business credit card. In addition, many credit card holders may not know when they are allowed to use a business credit card and when they are not. These cards operate in the same way as most credit cards, though they are slightly different.

Many small business owners and sole proprietors use these cards for business expenses. This makes it easier to keep track of company purchases versus personal purchases and may result in higher tax returns at the end of the year. There are other advantages to business credit cards as well, which are explained below.

An Explanation of Business Credit Cards

A business credit card may be used by a company to make work-related purchases, rather than having an employee purchase items on a personal account and then be reimbursed. It may also allow a larger company to make big purchases, which it would not be able to do on capital alone. Credit cards are also an alternative to large business loans. Purchases made with a business credit card may positively impact a company in a variety of ways. The credit card may also help an organization manage all its business expenses and keep them in one place.

It is important to understand that business credit cards are not the same as corporate credit cards, though both may be used to make business-related purchases. Individual employees are usually responsible for the expenses on a business credit card. This may increase a company’s efficiency and help it keep track of how each purchase benefited the organization. In contrast, CEOs are responsible for corporate cards. Corporate cards are typically only used by larger companies to make transactions with a specific bank.

Another benefit of business credit cards is that they give companies the opportunity to improve their credit histories. Having a good credit history may be crucial to an organization’s success. The company in question simply has to pay off credit expenses on time. Then, it may show its lenders and investors proof of good credit, reliability and responsibility. A business that has a bad credit history will hurt itself, because investors may not want to take a risk on that company.

The Important Differences Between Business and Personal Credit Cards

If you have a business credit card and a personal credit card, it is crucial that you understand the difference between them and do not confuse your purchases. Having a good understanding will also allow you to select the credit card type that best suits your business. Below are a few of the most important differences:

  • Business credit cards only affect business credit, and personal credit cards only affect personal credit. A business is still liable for bad credit, but employees within the company will not be personally affected.
  • Certain business credit cards provide companies with organizational tools and other perks. For instance, you may be able to organize your purchases with an online system. An online system typically allows you to see all your records in one location, systemize your receipts and more. You may also be able to have several business credit cards printed so that your employees do not have to share a single card.
  • The benefits of a business credit card are different from those of a personal card. A personal credit card may have benefits such as cash back on qualifying purchases, airplane miles and points. A card for business typically has benefits that relate to the company as a whole. For instance, your organization may qualify for advertising and shipping discounts, a lower monthly WiFi bill, discounted phone services and certain office supplies.

There are other differences between the two types of cards, the most important being that business credit cards may be very worthwhile for your company’s credit but not for your personal credit. Keep in mind, however, that wanting to separate personal expenses from business expenses is reason enough to obtain a business credit card.

Obtaining a Business Credit Card

The first step to obtaining a business credit card is to research multiple providers and find the card that best suits you and your company. During this process, it is important to take your company’s business situation and spending habits into consideration. Keep in mind that no business credit card will be perfect, and some credit card features may become disadvantages in the long run. However, you may be able to find a card that offers most of the features you are looking for. Some especially useful perks include no annual fees, longer promotional periods with a 0 percent introductory rate and high credit limits, which will allow your company to make large purchases. Your business may also benefit from lower interest rates, though a lower interest rate is not guaranteed.

Once you find a card that you think will work best for your company, you must provide the credit card company with important information about your business. This includes the name of your business, the services your business provides, the company’s contact information, Employer Identification Number (EIN), the number of employees, revenue information and how much the company spends on average in business expenses.

You may also be required to submit information about yourself, such as your position within the company, Social Security Number (SSN), contact information and household income. Make sure that this information and the company information is accurate, as it will determine the card’s interest rate, perks and credit limit. You will also need to submit a signed guarantee which makes you liable for any debt the company does not pay back, in the event that it goes out of business.

If your company is approved for a business credit card, you will receive the new card in the mail. You may then activate the card and begin using it for business expenses. It is very important to keep track of which employees have cards, what they are using the cards for and how much these expenses help your company. You do not want to have unnecessary expenses on your card, especially if your company is required to pay a higher interest rate than normal.