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Business credit cards have several benefits, from giving small business owners a way to keep their business and personal finances separate, to offering various perks and rewards for business-related purchases.
How are business credit cards different from personal credit cards?
Credit cards for businesses often have higher credit limits than personal credit cards, and may also come with perks like cash back on business purchases such as office supplies or travel expenses.
With those higher credit limits, you can afford to purchase office equipment. Also, a business owner can order extra cards on the same account to issue to trusted employees and keep track of their individual spending on the company account.
From large companies to freelancers, businesses of all sizes can benefit from rewards and from the ability to track spending. A business credit card can help a small business grow faster, too.
And if you pay off the balance each month before the payment due date, you can get by without paying interest.
Getting approved for a business credit card
Small business owners should know that their personal credit score is taken into account along with the creditworthiness of the business -- because the financial acumen of the owner has a lot to do with the company’s success.
Most business credit cards require a personal credit score of over 600, and some require a score of 700 or more.
So you should make sure you’ve done all you can to improve your own credit score before applying for a business credit card.
Because the business owner is so closely connected with the company’s finances, you might be required to sign a personal guarantee when getting a business credit card.
You’re basically cosigning for your business, and promising to pay for the charges on the card in the event the business fails.
Things to remember about business credit cards
When shopping for a business credit card, there are a few things to keep in mind:
●Not all business cards have annual fees, but if a card does not have an annual fee, it also might not have as many rewards and features. Choose your perks wisely.
●You might be charged an extra fee for each card you add to the account for a new employee.
●Interest rates for business credit cards vary. Generally they aren’t too much higher than the rates for personal credit cards, but they may have a higher interest rate if the credit limit is higher.
●Corporate credit cards may offer purchase protection, but usually less than you get with your personal credit cards.
●Business credit cards are also not monitored as closely as personal credit cards for fraudulent activity. Be sure employees are careful with their cards.
●Be sure to keep your business credit card for business-related purchases only in order to make tax time easier.
Something else you might wonder about small business credit cards is whether they can impact your personal credit score.
The answer is that they usually do not -- unless the business fails and your personal guarantee comes into effect.
But they can also help your personal credit score by keeping business debt out of your personal credit to debt ratio.
Business credit card features
Credit cards for businesses often have business-related reporting features such as spending reports and expense tracking.
That’s in addition to cash back, miles and other rewards.
Also, larger companies may benefit from an increased reward earning potential when they add more employees to the company account.
Applying for a business credit card
If you’re a small business owner, all you need to apply for a card is:
●Your business’s Tax ID number
●Your social security number
●Business address and phone number
The process for applying for a business credit card is fairly easy, and your new business credit account can help you grow your business.
Just be sure to shop around and choose a card that comes with perks that fit the way you spend for your business, and you’ll reap the benefits.