If you have a small business that is thriving, opening a business credit card in your business name that is used for business purposes is recommended. You can use a personal credit card in the beginning of your business but as you plan to grow then a business credit card is the best option because it has special perks and features. Below we will discuss the other several reasons you should get a small business credit card.
High Spending Limits
When you have a business credit card, lines of credit limits start at $50,000 or more. A high spending limit allows you to make large expenditures or if your business has steep operating costs. Remember to pay the bill in full every month or else you will incur huge fees.
Access to Cash Flow and Financial Flexibility
Many creditors offer attractive perks and features that can help you pay for travel expenses and business supplies. You can also get rewards to use for gift cards or getting cash back. Depending on the needs of your business, you may even get a credit card that gives you rewards on advertising purchases. There are many types of credit cards available but be sure to get one that is suitable for your business.
Many business credit cards offer monthly and quarterly expense tracking. This makes your life a lot easier when it comes to tax season. It is important to keep your business expenses separate from your personal expenses to maintain limitation of personal liability.
You might want to search credit card statements for deductions around tax time. Small business cards make that easy since they give you an itemized report of your spending. If you use a personal credit card, the reports are not as detailed.
Boosts Your Credit
When you make your payments on time, your credit rating improves quickly. Building a business credit will allow you to qualify for better rates and terms on business loans. The better your credit score, the better loans you will receive.
Using a business credit card makes online transactions easier. You can make purchases and do business with vendors, contractors, and suppliers.
Control Over Employee Spending
If your employees travel, make purchases of supplies or inventory, a business credit card can help you to keep tabs on how much they are spending and what they are buying. There are limits that you can place on spending as well for employees who use the business credit card.
0% Intro APR Periods
Business credit cards offer introductory 9% APR terms that tend to be nine of 12 months and apply to purchases, not balance transfers. Those that offer promotional balance transfer APRs charge balance transfer fees, making it more costly to move debt from one card to another.
Disadvantages of Business Credit Cards
Although there are many benefits to business credit cards, there are also some disadvantages as well.
- Security Issues: it is important for employees to not use the card for personal spending and that they take precautions when making online transactions to avoid from being hacked.
- Less Protection: business credit cards do not carry the same protection that personal credit cards do. Be sure to review the level of protection and services the credit card you are applying to offers.
- Fluctuating Interest Rates: the interest rate for your credit card can fluctuate unlike a loan or fixed line of credit. Be aware of the rates of the credit card you apply for and how they can change.
The Bottom Line
Business credit cards can provide many important benefits for your business. Shop around credit card companies to compare interest rates, grace periods, special perks and features and everything else they offer. Pay attention to what the additional fees are, if any since you will have to pay those as well. Be careful to read the fine print carefully before you complete an application.