Should I get a business credit card?

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Should I get a business credit card?

If you own a small business with employees, are self-employed or have a side hustle that turns a profit each year, you may be wondering if you could qualify for a business credit card.

But is getting one a smart move? The truth is, it depends. Although business credit cards can offer a slew of benefits, getting one - and using it regularly - comes with a certain amount of risk as well.

Potential business credit card perks

Since business credit cards are geared toward small businesses and self-employed individuals who might spend a lot to keep their businesses afloat, their rewards programs often offer relatively high rates of return.

Some cards offer as much as 5 percent cash back on purchases made at office supply stores.

Other business cards offer high return rates on business or travel-related purchases. And if you use your card regularly, all of that cash back can add up in a hurry.Having a business line of credit for all of your business purchases could also make tax time easier by helping you keep track of your work-related expenses.

If you use your business credit card for your business purchases year-round, you easily access a record of the business purchases you've made through your credit card statements when completing your tax return. Although you'll still want to save your receipts, this perk alone can make your life a whole lot easier.

Business credit card protections

Many business credit cards come with additional protections that can be harder to secure with a consumer credit card. These can include free trip protection (also known as trip cancellation insurance), discounts on rental cars, auto rental coverage and price protection.

Budgeting tools, chip-and-pin technology and no foreign transactions fees round out many of the top business cards' offerings.

Protections you don't get

For the most part, potential drawbacks are due to the fact that consumer protections from the Credit CARD Act of 2009 don't apply to business cards. Because of this unequal treatment, business cards typically come with fewer safeguards than regular consumer cards. For example:

  • Interest rates on business credit cards can change without notice.
  • Whereas the CARD Act now requires a 45-day notice before making certain key changes to a personal account, banks aren't required to give business account holders the same notice.

How business credit cards affect your personal credit

Although business cards were created for business use only, it's important to note that your business and personal credit profiles can still be intertwined.

When you apply for a business credit card, lenders typically take your personal credit standing and credit score into account. Likewise, you can also be personally liable for all business accounts and transactions. In other words, the money your business borrows can be your personal problem too.

Bottom line

As with any type of credit, the key to using a business card is in how you use it. If you want to avoid being affected by fluctuating APRs or sudden changes to your card's terms and conditions, you can reduce your risk by making sure you can pay your balance in full every month.

The benefits that business credit cards offer can be yours for the taking. It's up to you to decide whether the risk is worth the reward.

About the author: Holly Johnson is an award winning writer and frugality expert with a focus on credit cards and optimized living. You can find her words and works on sites like U.S. News and World Report, The Simple Dollar, Credit Karma, Frugal Travel Guy and Get Rich Slowly. Holly is also the founder and lead writer of her own websites, Club Thrifty and Travel Blue Book.

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