Small Business Credit Cards

Even businesses with only one or two employees should take the time to have separate small business credit cards. According to the United States Small Business Administration, 65 percent of small businesses regularly use credit cards, but only 50 percent of the cards used are actually in the name of the business. Why does this matter? It puts personal credit at risk on business expenditures.

Owning a small business is a risky venture, especially in today’s turbulent economic times. It is important to keep personal finances out of the way of the risks business spending can bring. Because of this, it is important to learn about the benefits small business credit cards should provide.

What Makes Small Business Credit Cards Different

Some small business credit cards offered by banks and credit unions do not provide much of an advantage over personal credit cards. Because of this, it’s important to shop around and find the small business credit cards that actually do provide advantages. According to the United States Better Business Bureau, these advantages should include:

  • Business Spending Reports: Many small business credit card providers include this service with the cards they issue. This free reporting tool, usually available through the account manager online, organizes business credit card transactions into spending categories, which makes expense management easier to deal with.
  • Higher Spending Limits: Often, small business credit cards provide higher spending limits than a personal credit card, which is often necessary to help with operating cash flow.
  • Multiple Cards: For a business with multiple employees, cards can be issued to different people on the same account. Most small business credit card providers also include tracking for each employee’s spending.
  • Perks and Rewards Programs: Because of the higher spending limits, and the frequency with which businesses use their credit cards, it is easier to take advantage of the perks and rewards programs most credit card companies offer.

The added benefits of a small business credit card may mean a higher APR, but this is not a concern if the balance is paid in full each month (which is recommended, if possible). Making sure the balance is paid each month, or at least kept low, is usually possible through online banking and automatic payments.

Credit cards in the business’s name also help build a credit record for the business itself. If payments are made on time and the balance is kept manageable, this can help later on when applying for small business loans, grants, and other types of financing. Other tips for building a business credit reputation include establishing a consistent business identity, providing key documentation, and applying for a DUNS number from Dunn & Bradstreet, the most important business credit reporting agency.

As always, when dealing with credit or financing of any kind, it is important to watch out for fraud when applying for small business credit cards. Using a well-established bank or community credit union is the most reliable way to go. Though small business credit cards are often offered through online promotions, if it sounds too good to be true, it probably is.