If you are a small business owner, a business credit card can be very beneficial for you. Regardless of the nature of your company or ownership structure, you can use a business credit card to separate your personal and business expenses.
The most common practice is to have a separate credit card for your business. However, if this is not possible or not desired, an alternative is to have a personal credit card that is used only for business.
A credit card for small businesses offers the same benefits as a personal card. And it also offers some unique business credit card benefits. Let’s take a look at the benefits of a business credit card:
- Convenience
It is much easier to carry a business credit card in your wallet than to carry large amounts of cash or checks when making business purchases. A credit card is especially convenient for online transactions. With the increasing popularity of digital wallets, credit cards may be the only way to pay for some goods and services.
- Protection
With most cards, you can dispute any unauthorized charges on your account and avoid paying until the dispute is resolved. Many credit cards offer some form of protection if your purchases are lost, stolen, or undelivered.
- Reduced cash flow problems
Many new business owners start out on a shoestring budget. A business credit card can help you make important purchases, even if you’re temporarily short on funds. This can help keep your cash flow on track.
- Easier than getting a loan
Often, the process of getting a business credit card is faster and easier than getting a small business loan. It can be difficult to get a loan if you don’t have significant collateral. Collateral is required for a traditional loan or business line of credit, but it’s not required for a credit card.
- Expense Tracking
Many cards allow you to break down your expenses into categories such as hotels, food, office supplies, etc. This can help make accounting and tax filing easier. It can also come in handy if you are subject to a tax audit.
- Helps separate personal expenses
To keep your accounts accurate, you should keep your personal expenses completely separate from your business expenses. Having a separate credit card for business keeps your accounting clean and protects your personal assets from being mixed with business assets.
- Helps build company credit
Building a good payment history can help you establish and improve your company’s credit score. Just as improving your personal credit score can enable you to borrow more money at lower interest rates and has a positive impact on insurance rates and your ability to rent out properties, the same applies to your business credit. Once the company itself has established a good credit history, personal guarantees may no longer be necessary.
- Benefits
Business credit cards often have better benefits than personal cards, including lower interest rates, higher credit limits, longer periods before interest increases, and early payment discounts.
- Offers
A business credit card may offer more offers than your personal cards, such as more points for cash-back or frequent-flyer programs, airline baggage fee discounts, airline lounge memberships, and hotel and car rental discounts. If you don’t do a lot of business travel, a general cash-back rewards card may be best.
- Cards for Employees
Once you have a business credit card account, you may be able to get additional cards for your employees. Doing so makes it easier for the employee to conduct company business and helps you track employee spending. You may be able to set a spending limit for each employee, preventing an employee from exceeding their budget.
In some cases, you may initially only be eligible for a secured credit card with a small credit limit, backed by a bank deposit or some other form of collateral. Once your company has established a good payment record, you can switch to an unsecured card and increase your credit limit.
Do careful research to determine which cards are best for your business. Also, try to get a card from a large national or regional bank. This will help your company take advantage of other financial services that such a large institution may offer.
