Should You Apply For A Business Credit Card?

When shopping for a new credit card, always compare credit card offers in depth.

Should a small or new entrepreneur get a separate business credit card? Before we answer that, it is best to look at some details about business credit cards that are being marketed to consumers these days. Most credit card issuers have cards that are targeted towards small businesses. There are some similarities between these cards and regular consumer cards. So let’s take a look at them, shall we?

Similarities Between Consumer and Business Credit Cards

1. Reward Types. Most business credit cards issued by banks have similar reward programs to those that are tied to their consumer versions. There are cash back business credit cards, rewards business cards and just plain vanilla ones. But there are subtle differences that you’ll find with cash back business cards. While consumer cash back cards tend to offer rebates for gasoline, supermarket and drugstore purchases, business cards have rewards that are more suitable for business owners, such as extra rebates on “office supplies”, “phone bills” etc.

2. Cards for employees and spending limits. Consumer cards allow you to have numerous authorized users. Business credit cards also let you issue cards for your employees. But the main difference is that you can set limits for each employee card holder (unlike with regular consumer cards). If you have employees whom you want to give credit cards to, this is a good enough reason to get a small business credit card.

3. Expense Reporting. Business credit cards often offer monthly or quarterly expense reporting and breakdown; this is one area where they tend to outshine regular consumer cards.

4. Credit Limits. This really depends on your credit standing, but over time, most business credit cards tend to give higher limits.

Some Not So Well Known Facts About Business Credit Cards

So you want to get a credit card. Before you do, take a look at these facts. Here are some things which many people don’t know about business cards:

1. You are personally liable even though you have a business card. Most folks do not realize this. Even if you incorporate, most (and I say most, not all) small business credit cards require a personal guarantee. If you notice, business cards require your social security number when you apply for the card. Once the issuer has your SSN, they will pull up your credit report. Hence, very often, your personal credit score will determine whether you can get a business credit card.

Business cards carry the same personal liability as personal cards. Also, your company needs to have a certain amount of revenue and a certain number of employees before banks will issue you corporate cards. In this space, American Express is the biggest player.

2. You can apply for a small business credit card even if you have no business. This is a little known fact which stems from the fact above. The card holder is personally liable even if they have a regular small business credit card; also, anyone can apply for a business credit card, which often has better rewards than its consumer cousin. If you do not have a business EIN tax number, you will be simply considered a “sole proprietor”.

As an example, take note of the business version of the American Express Costco Card, which pays a higher rebate on gasoline purchases (4% vs 3%) than the regular Costco Card. And what about the American Express Gold Card, which has exactly the same features as the American Express Business Gold Card? Because the business version is part of the OPEN network, you can get discounts with merchants like Fedex, Marriott Hotels etc. So if you are looking to get a rewards card, you might as well get the business version!

3. Credit card issuers have stopped offering balance transfer features on business cards. For years, before the 2008 financial crisis hit, consumers have taken advantage of 0% APR balance transfer offers (check out this cool calculator). However, because credit lines tend to be larger for business credit cards, these offers have literally disappeared from the business space. Because the economy is in trouble, credit card issuers do not want to take the risk that high risk customers will simply transfer their balances to them. Hence, if you are looking to get a balance transfer credit card, you’ll need to turn to a personal card. But don’t bank on getting a high credit limit such as what you’d get with a business card.

Should A New Entrepreneur Apply For A Separate Business Credit Card?

The answer is a resounding yes. Let’s review the benefits of carrying a business card. You could:

  • Earn better cash rebates for business expenses
  • Separate your business finances
  • Receive better rewards in most cases
  • Receive better expense breakdown reporting.

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