A 2012 survey of small businesses by the National Small Business Association found that credit cards are the second most popular source of financing for small businesses (second only to a revolving line of credit from a bank). Business credit cards can provide you with much-needed funds to keep your business running.
Whether you're a corporation, freelancer or sole proprietor, you may be eligible for a business credit card. Although card issuers sometimes ask to see financial statements or verify the existence of a business checking account, the business doesn't necessarily need to have made any money yet.
Business credit cards can be useful when turning to a bank or alternative source for funding is impossible or too time-consuming. Many business cards have higher spending limits and offer business owners a variety of time- and money-saving benefits that aren't necessarily found on personal credit cards.
Below, you'll find seven reasons why you should consider using a business card, and a warning about the potential risks.
1. They can help you stay organized.
Using a business credit card can make keeping personal and business expenses separate easy. This often comes in handy during tax time, when you can more quickly identify your deductible business-related expenses.
It's also a safety measure. Using the same account to pay personal and business expenses could put the liability protections that come with running a corporation (as opposed to a sole proprietorship) into jeopardy.
2. You'll be able to establish business credit.
A business credit card can also help your business establish its credit history, which is different from your personal credit history. This can be useful, and sometimes necessary, if you want to take out a business loan, apply for a grant or receive lower rates on business insurance policies.
Business card issuers often consider both the business owner's and business's credit scores when reviewing an application from a new business owner. They may even require you to sign a personal guarantee, making you personally liable for the charges even if the business declares bankruptcy. Once your business's credit is established, though, you may be able to get a business card without having to sign a personal guarantee.
3. They can simplify your bookkeeping.
If you're having trouble juggling your time to run a business and take care of all the necessary administrative work, don't fret -- many business credit cards have extra features made specifically for business owners to help them categorize and track expenses.
For example, Chase offers an accompanying app that lets you take pictures of receipts and match them to purchases. MasterCard allows business card holders to create detailed and customizable spending reports.
And with business cards, you'll typically receive quarterly and end-of-year summaries with a breakdown of your expenses.
4. You can use them to delegate purchasing.
Most business cards let you request employee cards, linked to the business's account, for your staff. Allowing employees to make purchases on behalf of your business gives them a sense of autonomy and expedites purchases. In addition, you probably won't have to deal with as many reimbursement requests.
Often, business card providers will let you set spending limits for each employee card, and some even allow business owners to get more specific with rules and set maximum purchase amounts or limit purchases to specific merchants on a card-by-card basis. You may also be able to sign up to receive alerts whenever a purchase is made.
5. They come with rewards programs tailored to business expenses.
Just as many personal credit cards offer rewards to cardholders, many business cards are part of rewards programs. Often, the rewards are tailored to better align with business interests.
For example, consider these business cards from our marketing partners. The Ink Plus® Business Credit Card (The information related to the Ink Plus® Business Credit Card has been collected by Credit Karma and has not been reviewed or provided by the issuer of this card.) offers five rewards points per dollar spent on the first $50,000 spent at office supply stores and on internet, mobile phone, landline, and cable TV services each account anniversary year. The American Express Business Gold Rewards Card offers three rewards points per dollar spent on the first $100,000 per year (and one point per dollar thereafter) in annual purchases in one category of your choice: airfare, gas, shipping, computing and advertising at select merchants. It also offers two points per dollar spent on the remaining four categories, up to the first $100,000 per category per year (and one point per dollar thereafter).
6. They offer additional savings opportunities.
In addition to being part of a rewards program, business credit cards often give you access to exclusive savings programs. Each of the big three issuers has one: American Express has OPEN Savings, Visa has SavingsEdge and MasterCard has Easy Savings.
If cardholders register their card with the savings program, they become eligible to receive discounts or bonus points in their rewards program with a variety of merchants. The savings are automatic and build on top of any coupons or other rewards programs.
7. They include purchase protections.
Business cards often come with similar purchase protections to personal cards, but with higher limits. Specifics vary by card and issuer, but most business cards offer the following:
- Purchase protection - They may refund business owners up to $10,000 if an item is damaged or stolen within 90 days of purchasing. However, this coverage typically will only kick in if you don't have contents insurance coverage, or once this primary coverage has been exhausted.
- Extended warranties - Some cards add up to an additional year of warranty coverage on purchases, typically to a maximum of $10,000 per claim.
- Return protection - Business cards may reimburse business owners for purchases made in the last 90 days, even if the merchant won't accept returns.
Be cautious of the fine print.
The 2009 Credit CARD Act, which added extra consumer protections to personal cards, doesn't cover business credit cards. Unlike personal cards, the interest rate on business credit cards can change without forewarning and penalty interest rates (rate increases after a missed payment or when the credit limit is exceeded) can be applied to past purchases.
It's important to familiarize yourself with your card's fine print, make timely payments and don't spend more than a card's limit.
Business cards generally offer business owners a higher credit limit than personal cards, access to special savings programs, extra purchase protections and more. However, business owners need to be aware of the risks involved when using a business credit card, including the fact that they may be held personally liable for the charges.
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