Why Get A Business Credit or Debit Card?
Having a credit or debit card to help separate and manage your business expenses is a must in many cases. Business cards can also offer an easy way to track employee spending and limits, as well as provide another way to help finance your business. But does all that convenience come at a price? Not necessarily.
If used wisely, business credit cards are a valuable asset to any business, no matter if you are the only employee or if you employ thousands of people. In many cases, such cards offer a multitude of rewards including air miles, hotel rewards points or other loyalty program points which allow you the opportunity to stretch each business dollar even further than before. Of course, there is a downside when talking about using credit in your business. Depending on how your business is structured, you may become personally liable for all expenses charged on those cards if the business can’t pay them. This can be personally devastating financially. Before applying for a business card, take into account some of the following tips:
- Business credit cards require good credit. In almost every case, you (or your business) needs to have good credit or you won’t qualify. This is because credit card companies want you to spend and use their cards, and they can’t take the chance if you are a credit risk.
Personal liability can be imposed with a business credit card. You can face personal liability even if you own a business and use a business credit card. In the early years of owning a business card, your personal and business finances are mingled. If you are able to cultivate a good relationship with your issuer over time, then the personal liability condition may be lifted.
Business organization also matters. If you have a small business or are a contractor, odds are that your business is structured simply (such as in a sole proprietorship or partnership), which puts you and/or any partners you may have, on the hook for charges if the business can’t make the payments. Not only could this jeopardize your current finances, but it has the potential to devastate your personal credit, making it almost impossible for you to get any kind of credit in the future for quite some time. The good news is that this can be mitigated by simply using another business structure like an LLC or S corp, though there may be tax implications.
But, if you are ready to jump in, there are tons of products out there for the taking. As always, comparison shopping is a must when deciding which product will work the best for your unique business situation. There are general business cards that you can sign up for, but if travel is your thing, you might decide to pick up an air miles or hotel rewards business card instead. If you’re a business person about town, getting a business gas card that will give you cash off of fill ups at the pump is a must. If you like building up loyalty points and then redeeming them for gift cards, gadgets or other items, then you can opt for a card that shares these benefits. Or you could just settle for getting a percentage of your monthly spend back as a cash rebate. The choice is yours.