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Sun 01 Jun 2014 | By:

Business Credit Cards: Everything You Need to Know

Business Credit Cards: Everything You Need to KnowIf you have registered your business, gotten an EIN and are considering a business credit card, you’re not alone. In fact, statistics show that 65% of small businesses use credit cards on a regular basis, but less than 50% of those cards are in the business’s name.

There are a number of good reasons to switch to using a business credit card instead of using your personal credit card for your business. Let’s go over what you need to know.


Why Should I Get a Business Credit Card?

You should get a business credit card to benefit from the services that a true business credit card has to offer, as well as to minimize the risk to your own personal credit.

Some business credit cards will require your own personal credit be put on the line, but a true business credit card will only be reported to business credit reporting agencies. Regardless, a business credit card offers certain benefits that a personal credit card doesn’t. These include:


What Risks Do I Run with Business Credit Cards?

If the business credit card application requires your Social Security Number, be aware that you might still be putting your personal credit at risk with the credit card. However, if you were using your own personal credit card already, there’s little difference here, other than you enjoy the benefits we talked about above.

A major risk, though, is that you can begin damaging your business’s credit rating, too, if you aren’t mindful of your spending patterns. You’ll want to pay your bill every month to avoid negative reporting to Dun and Bradstreet or other business credit reporting agencies.

You can also run a higher APR with a business credit card, but this is not a concern if you pay the balance in full every month. Make sure you don’t run a line of credit off a credit card, and you will benefit from the rewards of the business credit card without suffering additional interest and fees.


How Do I Find the Best Business Credit Card?

Shop around, and look carefully at the different options out there. If the card requires an annual fee, look at what you get for that fee. If you have to pay for your plastic, there should be a justifiable reason for that.

Rewards programs are often the most, well, rewarding with cards that require an annual fee, but make sure you are going to take full advantage of the rewards before you jump at the program over one without an annual fee.

For example, many business credit cards will offer perks such as cash back or frequent flier miles. These can be very helpful to your business, so choose wisely among the various options out there.

If you do not need to travel much for business, you should focus on cash back programs, which can be very lucrative. Many of these programs will specialize in a particular category of spending (such as more cash back for office supplies than, for example, fuel purchases), so look carefully at the terms and conditions of the cash back rewards program before you apply for the business credit card.


Can I Get a Credit Card Without My Personal Credit?

Up to now, we’ve been talking about how important it is to separate your personal credit profile from your business credit, and how a business credit card can help with that. The sad truth is, though, that if you are new to the business world, you will probably have to put your personal credit on the line for a few years to maintain a business credit card.

It’s still a good idea, for all of the reasons outlined above, but here’s what you need to work on in order to eventually get a business credit card based solely on your business’s good credit.

In the meantime, while you’re building your credit history, look to non-major trade credit cards to build your history. For example, fleet fuel cards can be an excellent way to build that credit history, as can lines of credit from office supply stores or food supply vendors.

Make sure the credit issuer reports your good credit history to the business credit bureaus (such as Dun & Bradstreet), and make sure you make all of your payments on time.


Wrapping Up

Business credit cards can be very useful, if you plan your business carefully for them. You probably will not qualify for a business credit card based solely on your business credit at first, but it is still important to get into the habit of separating your business expenses from your personal expenses.

You will also benefit from the rewards programs business credit cards offer, so look carefully at what your needs are. The majority of the time, a business credit card is better for a business than a line of credit or using your personal credit card, so shop wisely and use your card wisely.

About Ryan James

Half hardworking hermit, half avid adventurer, Ryan founded Startup Savant to simplify entrepreneurship and pay it forward by donating a portion of all revenue to support children's education via DonorsChoose.org.