We are all used to getting credit cards for the benefits of spending and consuming goods. Credit cards can also be used to avail services with the help of claiming cash rewards and incentives. Having a credit card applies only liability. But is also leads to wise spending because you can consume the goods and services now and in instalment.
Most consumers consider this platform to make the most of their money spent. For entrepreneurs who are running a business and have to pay for the expense of their business transactions, owning a primary or regular credit card is not at all practical. This is because there will be more discounts and incentives if you purchase bulk orders. That is where business credit cards come into the spotlight. They aid business owners with their daily expenses.
Business Credit Cards are fundamental for business owners to separate the expenses. Those expenses can be made for personal reasons and the sole purpose of business. This way, the business owner will monitor more the costs of the company in terms of daily use. Having this card also means more generous cash rewards, money-saving incentive. Along with that it acts as a tracker of the expenses.
Finding the right business card is not far from choosing the personal credit card you prefer. There is a need for you to research more to know more options that will match your preferences and conditions of the business. Remember that this credit cards business will be a tool for you to aid your business. Also it will make sure it will not negatively affect your personal spending.
So let us now differentiate personal credit cards from business cards. This is carried out to know more about the distinction between the two categories.
The Difference: Personal Credit Card and Business Credit Card
In many respects, a corporate credit card and a personal credit card work in the same manner. Both can give bonus points, rewards points, introductory APR deals, and a sign-up incentive. However this is one major difference which is they’re governed differently. That implies corporate and personal credit cards may have different terms and restrictions. That is why a wise credit card consumer should be aware of before applying. Let’s start with a comparison of corporate and personal credit cards.
Enterprise and personal credit cards, whether chip and PIN or swipe, could be used for electronic and in-store transactions. They can be used in the same manner as personal credit cards can. The foundations stay the same, as do the security controls found on personal cards. This can include CVV/security passwords, expiry dates, signatures, and so on.
A personal guarantee (PG) from the applicant is required for nearly every business cards. If you fail on your credit card or make outstanding debts, the credit card issuers might obtain from you, not just the enterprise. It may even be necessary to appeal to the merchant appropriately to get a verdict.
Approval History of Personal Credit Cards
Even though a company credit card is intended for commercial use, a personal credit score is a primary qualification element for almost every major business credit card. This is fantastic news for businesses with excellent credit; you won’t have to worry about setting up a business credit score, sending company tax returns or income reports, or convincing someone to believe in your company’s vision, as you would with other enterprise funding options.
A credit rating can speed up applications and provide the client with a broader range of possibilities. Nevertheless, if you have a poor personal credit score or insufficient data to generate a credit score – a massive issue for small businesses, as Nav observed in research on credit ghosts some few years ago — it may be complicated.
Kind of Credit Cards for Businesses
Before you apply for business cards to keep your business going, you also have to know the different kinds of business credit cards available in the market. These are the types of business credit cards:
Business Charge Cards
If you’re someone who’s searching for a new credit card, don’t forget about business charge cards. A business charge card may be a great alternative to a business credit card, depending on your financial strategy and the structure of your small firm.
Business charge cards, like business credit cards, provide you with a line of credit. They offer the same bonuses, incentives, yearly maintenance fees, and general transaction costs. Moreover, two characteristics distinguish these cards: A business charge card has no defined credit limit. Unlike regular company credit cards, which often come with pre-set expenditure restrictions depending on your credentials, business charge cards don’t.re
With a corporate charge card, you’ll be able to make substantial transactions without worrying about exceeding your credit limit or constraining yourself in the future. Whilst your charge card provider may impose a credit limit if your payment history and purchasing habits appear to be alarming, this isn’t usually the case if you are a trustworthy borrower. You won’t have to think about restrictions.
Unlike some other business credit cards that permit cardholders to carry over their spending records every month while accumulating interest, business charge cards must be fully paid monthly. If there are unpaid balances, you’ll be penalized a hefty fine of 3% of the outstanding balance, and your credit line may be terminated.
Secured Business Credit Card
This is another kind of business credit card available in the market. Secured credit cards work similarly to a secured loan which gives the lender granting you money some security (usually a prepayment or a tangible asset of property). In regards with this, there will be an assurance when the worst situation happens that cardholders will receive their funds back if you can’t repay what you owed.
Most of credit cards are unsecured. The amount you may spend on an unsecured business credit card is entirely determined by the strength of your credit record.
A secured business credit card necessitates the payment of an initial deposit before the card may be used. The sum you may borrow is next governed by your security deposit. Cardholders can loan up to the amount you put up as collateral.
Revolving Business Credit Card
You’re perhaps already aware of the idea of a revolving business credit card. Talking about the words “business credit cards,” most people think or assume about revolving credit card.
A credit limit is imposed on revolving business cards pre-determined by your personal and business finances and also your credit history. You are accustomed to disburse up to that amount.
You may carry over your balance from monthly payments with these standard credit cards, paying only the minimum amount necessary. However, if you do so, your expenditure will accumulate interest at the rate indicated by the actual APR you are eligible for. In spite of that, if you are left with no choice, it is recommended to pay off your revolving business credit card every month.
Things to Consider Before Accepting A Card Offer for Business
When looking for a new business credit card, it’s critical to compare the existing options to ensure you acquire the best business credit card for your firm. Remember that business credit cards are universal; you must choose the most appropriate matching your business’ needs.
Here are five aspects to consider when evaluating corporate credit card proposals:
Annual Percentage Rate (APR)
Business credit cards with a 0% introductory offer on future purchases, debt conversions, or both provide a cost-effective option to fund your expenditures. This gives your business extra time to pay for inventory before interest accrues. Whereas most 0% APR introductory durations vary, several card providers will provide at least six months of interest-free credit.
Card providers offering low-interest rates are another item to keep an eye out for. This might help you save money on loan fees monthly. You can lower the cost of increased credit card payments and pay off the principal amount of your credit card debt quicker using this sort of business credit card.
Type of Card
There are quite a several cards made for specific reasons, so make sure the one you’re considering fulfills your requirements. Cards with “teaser” introductory rates, low-interest-rate cards, cards with incentives, airline rewards cards, unsecured and secured types of business credit cards and prepaid cards are the most prevalent types of business credit cards.
If you frequently fly for work, you might seek an airline affiliated business credit card. This sort of credit card allows you to earn airline miles for each transaction you make. The points and rewards you collected can be exchanged for travel expenditures like flights and accommodation stays, depending on the card provider.
Incentives and Benefits
You probably have a lot of costs that may be charged to a company credit card as an entrepreneur. Be vigilant for credit cards that provide points and cashback offers benefits. You are likely to benefit significantly from incentive programs for travel, marketing, phone and internet services, and delivery companies. If you are thinking of spending a lot of money in one of the categories listed with a card offer, the reward might be worthwhile.
Analyze the costs connected with the business credit card you’re thinking about. Some payments are worthwhile, while others are not, and the majority may be avoided. You have to consider if there are various transaction fees. Check out whether there is an foreign transaction fee if you travel to different countries. Remember that yearly charge business credit cards typically have better incentive programs and sign-up benefits than no-cost cards.
Credit Reporting Agencies
When you enrol for a business credit card, the card provider will nearly always examine the business owner’s reputation to establish trustworthiness. Your personal credit record is nearly always utilized in the credit decision, especially when you’re looking for a business credit card with an EIN.
It’s critical to consider enrolling for business credit cards that only report to credit bureaus for businesses. Business credit agencies are far more critical than you would believe. This not only safeguards your credit history but also aids in the establishment of your company’s credit reputation.
Elements of a Good Business Credit Card
Before acquiring a business credit card, you also have to consider these fundamental elements that will make your credit card as good as it can be. These are the essential elements:
Take some time to consider which incentives are most important to you and your businesses. For some entrepreneurs, it’ll be travel miles and other travel-related perks like free checked baggage, access to airport lounges, or extra miles. A co-branded card can let you optimize the advantage of a particular brand like Hilton or Marriott hotels). Another more generic card, like Chase Ultimate Rewards, maybe a better choice if you are flexible and book trips based on cost or convenience.
You’ll get money back that you may spend as you choose with a cash rewards mastercard. Even so, you’ll need a strong understanding of the sorts of transactions you want to make with the card since some cards provide more enormous cashback benefits for bonus areas like office supply retailers or gas purchases.
If you know, you’ll be carrying a load from now and then. Selecting a card with a low-interest rate possibly even a 0% introductory rate for purchases and balance transfer is critical to avoiding interest costs. Most credit cards have a variable APR that fluctuates with the economy’s interest rates. And, in most cases, your interest rate will be determined in part by your credit score and other conditions; the better your credit, the more likely you will be granted a low-rate card.
However, if you plan to pay off your debt in monthly instalments, you might be more concerned with maximizing your benefits. In such an instance, you’ll compare the yearly fee’s cost against the benefits you’ll receive. Remember that some credit cards reduce the annual charge the initial year to entice you to apply; make sure the long-term cost is reasonable.
Business cards are being known these days since its easier for consumers to manage and classify their expenditures. Some companies go even further and offer integrated expenditure reporting. If you’re going to issue staff cards, you’ll probably want to set up spending restrictions so you can prevent employees from making illegal or unauthorized transactions.
Risks Associated with Express Business Card
If there are elements of a sound business credit card, there will also be risks in utilizing business credit cards. We must not forget the things we have to be vigilant about when using credit cards for our businesses. These are the risks associated with business credit cards:
Your funds and credit rating might be jeopardized
When you apply for a company credit card, you will almost certainly be expected to sign a personal guarantee section. This section is an assurance that you will be liable in case your business has debts to pay. This means that if you can’t settle your debts in this business credit card, your personal credit scores will be affected.
Higher annual and membership fees
Even though this may not always be the situation business charge cards as one of the known business credit cards always have higher yearly charges as compared to a personal credit cards that consumer use for in purchasing goods and services. Before registering for a business credit card, ensure that you comprehend all costs involved.
Insufficient consumer protection
Consumer credit cards are covered by the federal Credit CARD Act of 2009, which alerts customers when interest rates on their cards change. Credit cards used by small companies are not hidden by this protection. As a result, if you often hold credit card amounts and pay interest on them, you may be affected by the lack of notice that your interest rates are increasing.
The Best Business Credit Cards
Leading Business Credit Card for Startups
Capital on Tap Business Credit Card: The Capital on Tap Business Credit Card might be an excellent business credit card for startups. This is because it has no duration in business restriction and credit limits ranging from $1,000 to $50,000. Owners of small businesses with acceptable credit may be eligible, and enrolling will only result in a soft review of their personal credit report. Like with any other small business credit cards, the personal guarantee is considered as a requirement.
Leading Business Credit Card for Daily Business Spending
Capital One Spark Miles for Business: Cardholders earn miles that have no expiry as long as they have an active account. They can also earn 2x mileage for every penny that they will spend. The good thing is there are no category or limits. For the first year, there will be no annual fee but after that is a $95 annual fee. The introductory offer is 50,000 miles and the ideal credit score to be qualified for this card is 670-850. This is considered excellent.
You may transfer your points to over 15 travel loyalty rewards and programs. This card instantly converts your points for any travel-related transaction. This will include flights, hotels, and transportation services. Members can also pass through security with a single bill credit for either the $85 TSA Pre® or $100 Global Admission application fees.
Leading Business Credit Card for Travel Perks
The Business Platinum Card by American Express: Members or cardholders can access amextravel.com. They can earn as many as five times of points on reserved accommodations and flights. Earn 1.5X Membership Rewards on the spending of $5,000 or more in essential business areas, as well as on all other transactions. However, there is a limit.
The American Express business card is ideal for regular travellers who want to add an element of luxury to their corporate excursions. Whilst the card does come with a high annual membership fee, users also get a ton of significant advantages in exchange. They receive substantial yearly travel credits, as well as unrivalled lounge access, including Amex Centurion Lounges.
Leading Business Credit Card with High Credit Limit
Brex Credit Card for Ecommerce: With the Brex Card, you may have a credit card limit of 50-100 per cent of your potential monthly revenues. That is up to $5 million. This card provides a net of 60 terms, which means you may pay your payment over the course of 60 days. This allows you to better regulate your financial flow. There are no fees or interest charges.
The biggest uncertainty that frustrates numerous entrepreneurs when looking for a business credit card is not realizing how much of a credit line they can get before applying. Some business funding sources, such as lines of credit and term financing, have screening procedures. They also include pre-approval tools that enable you to figure out whether you’ll be approved for the line of credit you need before you apply. However, these aren’t usually available until you’ve been approved for a business account.
Leading Business Credit Card for Freelancers
Ink Business Unlimited Credit Card: Cardholders can earn an unlimited amount of 1.5 per cent cashback on all purchases made for their company. The introductory offer is $750 and there is no annual fee required. For you to be considered, you must have a credit score of 670-850. This is an excellent credit score.
The Ink Business Limitless’ mark bonus is hefty $750 cash back. That is if you spend $7,500 in the first three months after creating your account. It will include an unlimited 1.5 per cent cashback on all business sales and purchases. You may get the most out of this card by combining it with other Chase card. They can include the Chase Sapphire Reserve and Ink Business Preferred.
Leading Business Credit Card for Reward Categories
American Express Business Gold Card: This visa card is advantageous for those people who are owning a small business. Though this card may not be suitable for business owners who are looking for credit cards with low annual fees, this card is considered unique. In each billing period, the cardholder will be given a reward of 4 points per dollar spent.
American Express Business Gold Card is most definitely worth it since you will get valuable rewards that can be redeemed for your travel. If you are also aiming to redeem gift cards and incentives, you will be required to have an annual fee of $295.
Frequently Asked Questions
Nowadays, it is important to have credit cards in order to help with our expenses. When we use credit cards, we can redeem new rewards and incentives. So this may give us something from the money we are spending on goods and services. We can also enjoy the goods and services right now and pay for them on an instalment basis. Mostly, people apply for a new personal credit card. It opens their daily expenses to a new window of the financial aspect. However, business owners either small or big can also apply for a business credit card. This is done so that they can track down their expenses and separate their personal and business advantage expenditures. It is very essential to make a distinction between these two categories of expenditures. This will aid us to track down and be aware of our spending status.
In this article, we have seen the difference between a personal credit card and business credit cards. Along with the kinds of business cards, things to consider before accepting business credit card offers. Moreover we also highlighted elements of a good business credit card, the risk associated with credit cards credit, leading cards business credit based on categories. We also discussed the criteria in choosing a good business credit card.
We also presented here the frequently asked questions to give ideas on the general things we must know as consumers. These questions will also provide helpful insights that consumers can use as references. So if they are planning to apply and acquire a business credit card, the FAQS will surely help them.
It is very fundamental that we are aware of our credit standing. That can either be personal or business accounts because one reflects another. It shows our capacity as a consumer to pay our debts. It also enables us to prioritize being financially responsible which bureaus of credit observe. Business credit cards have lots of advantages that we can utilize if we manage to maintain our good credit standing.
We must also be aware of the new risks associated with owning business credit cards. The reason behind it is that it can affect our credit scores which may be difficult to restore once destroyed. Right now, what we can do is research about the best business credit cards available in the market. We also have to match our preferences and needs with the credit card that we will avail of.