Business Credit Cards and How They Help Build Business Credit

Every business owner has some unexpected and extra expenses that they must handle once in a while.  The problem with these expenses is that they usually pop up when you least expect them.

For this reason, most business owners opt to get a business credit card. Additionally, this card can be used to finance company operations in the short term when a business is finding it hard to get accepted for loans.  

A business credit card is simply a plastic card like any other but the difference is that it is issued to a business not to an individual.  That means that every transaction carried out with this card should be for the benefit of a business.  Just like a personal credit card, business credit cards should be used with caution to avoid sinking the business into debt.   

However, business credit cards play by different rules than personal credit cards. For instance, protections provided by the Truth in Lending Act and the Credit CARD Act of 2009 do not apply to business credit cards.

A business credit card helps separate your personal finances from your company’s account. This lowers your personal risk in case your company goes bankrupt or gets into hard times. 

It is also important to note that any company can apply for a business credit card, ranging from a small business run by a sole trader to a limited company. Let’s look at some important tips on how to get a business credit card:

1. When you are choosing a business credit card, try and find a lender that can provide financial reporting that adheres to IRS categories.
2. If you want a credit card that has fees, choose one that provides great benefits like travel protection, flexible payment options, special bonuses and so on. You should choose such a card because the fees you pay for the plastic are worthwhile.
3. You should also get a card that caters to your business habits. For instance, if you travel a lot, choose a card that could get you rewards for airline tickets, rental cars and hotel accommodation.  There are also cards that offer cash-back rewards on gasoline purchases and others that offer discounts at retailers where you get your supplies.
4. Avoid business credit card companies that ask for a personal guarantee for loans extended to a new company.  This is because it is important to separate your personal finances from the fate of your company.

You should also remember that a business credit card can help you build your business credit.  Thus, you will find it easy to get accepted for loans if you manage the credit card well.  A well managed business credit card leads to a good credit history for a company that in turn can lead to a good business credit score.

For this reason, there is no need to hesitate in getting these credit cards. In fact, statistics show that more than 65 percent of small businesses use credit cards frequently.  Business credit cards are now among the major sources of financing for owners of small businesses.