4 Things You Should Consider Before Getting a Business Credit Card

An American Express sticker pasted at the entrance of a business in Chicago, on Jan. 24, 2020. (Scott Olson/Getty Images)

Opening a business credit card account is a great way to maintain and facilitate spending across multiple departments. Typically these cards offer larger signing bonuses and rewards than individual cards. These cards can often help businesses avoid cash flow problems and other financing issues.

On the contrary, if not handled properly these cards can be detrimental to your business. Here are four things to consider before getting a credit card for your business.

1. Card Issuers Consider Both Business Credit and Personal Credit History

As a business owner it’s important to mitigate any personal risk when operating your company. Unfortunately for business credit cards, issuing banks will consider both your personal credit history as well as any associated with your business. Typically, startups and small businesses owners require personal credit scores of 720 or higher to qualify.

If you’ve been in business for a while, make sure you provide a very detailed account of your past expenses. If you’ve been generally free of debt and on top of your payments then you’ll end up with great credit card payment terms. Maybe your business has a history of late or missed payments, you’ll end up with unfavorable payment terms or no deal at all.

2. Easier Accounting

Business credit cards make for a much easier accounting experience. Make sure you are very disciplined on your spending. Make an effort to separate all personal spending from business expenditures. This will accomplish two things: give you a better idea on expense forecasting and allow you to write off business expenses for tax deductions. Writing off business expenses is a great way to save extra money come tax season. Make sure you’re well aware of the qualifications when deducting business expenses.

If you own a larger organization and need to keep track of employee expenses, business credit cards are a great way to accomplish that. Rather than reimbursing each employee on a case by case basis, give them a credit card that they can use for all business related expenses.

3. Rewards, Rewards, Rewards!

One of the biggest perks of business credit cards are the rewards that come with spending. Generally, we spend exponentially more on business expenses than personal ones. That being said, rewards and points can really rack up.

According to NerdWallet these are the best small business credit cards of 2016:

Ink Cash by Chase

Enhanced Business Platinum by American Express.

Spark Miles by Capital One

Spark Classic by Capital One

Whether its a larger cash back percentage or bonus miles, these cards will typically offer awesome rewards.

4. Understand All Liabilities

As mentioned above, often times business credit accounts get intertwined with personal accounts. It is absolutely imperative that you’re well aware of any and all liabilities associated with your business credit card. It’s important that you understand the differences in liability.

Commercial Liability: This basically means the corporation is responsible for all debts. This is ideal, but is often hard to receive if you’re a smaller business.

Joint and Several Liability: This means you share responsibility of all debts with the company. This is most common for smaller businesses and start-ups.

When signing your agreement with the bank make sure you read all implications especially the fine print. It’s often difficult to find an issuer that is willing to put the entire responsibility on the corporation. That being said, make sure you understand your responsibilities as a business owner when applying.

A business credit card isn’t for everyone. If you’re still on the fence about applying for one, reference these four factors and make the right decision for your business.

By Chalmers Brown

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