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A business credit card is an affordable line of credit for business owners.
Business credit cards and personal credit cards have similar features. However, business credit cards have features that make them suitable for business rather than personal use.
A business credit card will help you build a business credit profile that will allow you to borrow money to do so in the future.
Whether you are a sole proprietor or the owner of a company with hundreds of employees, the best business credit cards can streamline business transactions and make it easier for your business to access funds.
While the features of each business credit card are different, here’s what you need to know to determine if it’s right for you.
How do business credit cards work?
Similar to how personal credit cards work, corporate credit cards provide users with a revolving line of credit that they can use to make purchases. This line of credit allows you to charge business expenses and pay later.
Your credit limit is determined by a number of factors, including your personal credit score and, if you have one, your business credit score.
Each month, you will receive a statement from your issuer that includes transaction history, statement balance, and the minimum required payment amount. If you do not pay off the balance in full by the due date, interest will begin to accrue on it.
Pros and cons of a business credit card
Just like any other credit cards on the market, business credit cards have their advantages and disadvantages to be aware of. It’s important to know how to navigate them so you can choose the best card for your unique business needs.
pros
- The best awards, bonuses and privileges for business
- Creates business credit
- Higher credit limit potential than a personal card
- Don’t mix personal and business expenses
- Easy transaction management
- Improving accounting for tax deductions
Minuses
What to Look for Before Getting a Business Credit Card
Business credit cards have other benefits that are not included in a personal credit card. When applying for a business credit card, issuers consider the following additional items that are not considered for a personal credit card.
Eligibility is based on your personal and business credit history.
Issuers look at both your personal and business credit history to determine if you are approved for a business credit card and what conditions you are eligible for. While a responsible use of credit in the past will affect your chances the most, make sure Experian, TransUnion, and Equifax personal credit bureaus have accurate information, as well as commercial credit bureaus such as Dun & Bradstreet, Experian Business Credit, and Equifax Small Business.
You will need to provide information about your business
Credit card issuers may ask you for your business name and address, employer information number (EIN), the date your business started, the amount of income it generates, and the type of industry in which you operate. to provide personal information such as your family income, social security number, and personal address.
You may or may not be personally liable for debts
The person or entity that is liable for debts depends on what type of liability the card offers. If it has commercial liability, your business is liable for all debts. But if it is jointly and severally liable, you and your business are both liable. Before you sign on the dotted line, find out your rights and responsibilities.
Customizable settings for authorized users
With corporate credit cards, you can make employees authorized users and easily control their spending. These cards often come with configurable user privileges so you can control how much credits individual employees can access.
Access to business-oriented privileges
Business credit cards tend to have rewards that are more suitable for businesses than for individuals. Depending on the card, business owners can earn rewards at stationery stores, gas stations, restaurants, and for purchases such as flights and technology.
Payment terms can be tailored for business
Realizing that business cash flow is not always predictable, card issuers often offer business-friendly payment terms, such as an advanced payment option. This is a payment plan that allows business owners to finance large purchases over time on terms different from those used for regular purchases.
However, payment terms may vary depending on the type of card. For example, corporate payment card balances are usually due within 30 days, and corporate credit card balances are not due until you make the minimum payment.
bottom line
A business credit card can make it easier to keep track of your business expenses, earn better rewards, and build a business credit profile. You must use your business credit card responsibly to maximize the benefits it has to offer. Finally, take the time to choose a business credit card that suits your business needs.
Editorial disclaimer
The editorial content on this page is based solely on the objective judgment of our contributors and is not based on advertising. It was not provided or ordered by credit card issuers. However, we may receive compensation when you click on links to our partners’ products.
