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Business credit cards provide a convenient way to make large purchases, such as office supplies, equipment, or manufacturing equipment. But every business owner – from owner to corporate executive – should know that business cards work differently than personal credit cards. Liability, eligibility and rewards may vary from card to card and not all individual consumer protection extends to businesses.
What is a business credit card?
Business Credit Card is usually for anyone who has a business. Large company owners and operators, sole proprietors and anyone in between may be eligible for a business card. There is no need to have staff or office.
Business credit cards are generally used for business expenses, such as business supplies, office supplies or travel. New businesses need to be careful about using credit cards that are not yet available or to withdraw money from a bank. Many business card holders have the same rules and conditions that prohibit them from using these cards for personal use.
Having a business card can be used to build a business loan. Some cards offer short-term financing for large purchases.
Ink Business Unlimited® Credit Card
1.5% reward rate
Get unlimited 1.5% cash back rewards for every purchase made for your business
Get back $ 750 bonus cash
13.24% – 19.24% variable
Good, excellent (700 – 749)
Who is eligible for business credit cards?
Most business owners are eligible for a business card as long as the owner is willing to keep good credit and personal and business expenses separately. It is not necessary to have a store front or a large number of employees, but the income shown may require a better card.
Qualified business owners include:
- Sole owners
- Small business owners
- Large business owners
- Limited liability companies
Here’s what business owners need to know before applying for a business credit card.
1. Business credit is different from personal credit
Most adult Americans have credit scores and credit history. Borrowing, registering for credit cards, and even paying for groceries can affect personal loans.
Business owners also have a type of loan called Business Credit. This allows potential lenders and credit cardholders to know how much a business owner is responsible for business debt. Cardholders look at individual and business credit history to determine if a person is eligible for a credit card and what the credit limit will be for the new credit line. Publishers may report business activity to business credit bureaus, including Dun & Bradrest, Professional Business Credit, and Effifax Small Business.
Small business owners or sole proprietors who do not have a business credit history may consider applying for a secure business card that reports to at least one business credit bureau. A good alternative may be a secure credit card from Wales Fargo Business* Card. In this way, a business owner can build a good credit before applying for a more popular card with better rewards.
2. A business must not register or include
Single owners, freelancers and partners can all qualify for a business credit card. To benefit from business credit, the business must not be included or registered. Although it may be useful when applying for a major business card, you do not need to have an employer’s IIN.
Independent, unregistered or unregistered business owners should be aware that they are personally responsible for any and all debts related to their business cards.
3. Business cards do not have the same liability protection as personal cards
The 2009 CARD Act provides important protections for private credit card holders in the event of fraud, zero liability, 21-day grace period payments and interest rates. Business cards, however, are technically free of these protections. Some business cards follow these guidelines anyway, but it is important to always understand the card terms and conditions before applying.
In addition to cardholder protections, there are two types of debts that apply to business cards – business liability and joint and multiple liabilities.
Large businesses and corporations with corporate cards can often enjoy business accountability, which means that when a business lender knocks, the business itself (not the cardholder) is liable for debts.
Small business owners and independent investors may have joint and multiple liability on the card, meaning both the business and the cardholder are liable for the debts. The cardholder may be hit by a personal credit score or even sent to a collection agency. Paying the bill on time every month will help the cardholder not be personally liable for business expenses (and interest).
4. Business cards also have rewards – some of which are for business expenses
Like personal credit cards, some business cards offer rewards to cardholders – cash back, travel prizes and welcome bonuses, to name a few. Some business cards can even provide short-term financing for large purchases, which is useful for new businesses trying to get off the ground.
When deciding which business card is right, look at what rewards are offered. Low entry APR seasons can help build a good business loan without increasing interest on large purchases. Rewards points or refunds may be returned for business trips, office supplies or employee gift cards. Buy protections such as extended warranties and return protection. Use it to buy new equipment and furniture.
Remember: Any purchase made with cash back or reward points may not be fully tax-deductible as a business. Consult your taxpayer to find out more.
5. Business card applications require more information than personal card applications
Business credit card applications require the same personal information required for a personal credit card application, such as name, date of birth, social security number and address. Business card applications also require information related to the business itself, including business name, industry, EEN (if applicable) and income.
The business card issuer will review all the necessary information provided in the application as well as the applicant’s personal and business credit history, to determine whether the business and its owner are a reliable borrower. To qualify for the best business cards with the best prizes, it is recommended that you have good to very good personal credit.
Always read the terms and conditions before applying for any business card. Applying too many cards in a short period of time can reduce the applicant’s credit score, making him eligible for a particular card or other type of loan.
6. Business cards usually have higher credit limits than personal cards
Because businesses have larger monthly costs (and larger revenues) than regular consumers, business cards have higher credit limits – sometimes in addition to zero ball. After reviewing a business owner’s application and credit history, the issuer decides what the credit card limit will be. Small business owners tend to hold higher credit than the average consumer, which can contribute to higher credit risk among small businesses. Business card holders can request higher credit limits at any time by contacting the card issuer.
7. Employees may have their own credit card
Most business card issuers allow cardholders to hold credit cards for employees. Publishers can give a few employee cards for free, while other providers may charge a card fee.
Many cards set expense limits, card activity warnings, and even card restrictions allow the cardholder to control employee costs. Keep in mind that employee business cards may have a common and multiple liability, which means that the employee and the business owner may be equally liable for the card debt.
8. Business cards may have different payment terms than personal cards
Cardholders realize that they do not always have the cash to pay for large purchases. Some cards offer extended payment options that allow the cardholder to finance larger contracts with special terms. Cardholders may be able to pay for a longer period of time without having to pay interest or pay off the full interest of the card.
Payment terms vary depending on the issuer and the card. The business card holder should call the card issuer to discuss payment options.
Owning a business credit card is similar to owning a personal credit card, but there are key differences that every business owner should be aware of. They are great for building big business credit cards, earning rewards, and making top-notch purchases with special financial support. Try to double the benefits between a business card and a personal card. Choose wisely the rewards and benefits that are important to your business. And, like any personal card, don’t overdo it on a business card – you could be personally liable for any debts.