When a business owner applies for a credit card, he or she will have the option to apply for a consumer card or a business account. While there are many similarities between the two, there are also a few key differences. The credit card that is selected by the business owner will impact everything from convenience and usage abilities to financial record keeping, bonuses and perks and more. Each card has different features, costs, and benefits. However, when all options are carefully analyzed, the small business owner may discover that there are clear benefits associated with applying for a business card rather than a consumer card if the credit card will be used only for business purposes.
Benefit From Business-Related Perks
Some credit cards do not have perks, but most cards today do. The majority of the perks that a business owner can benefit from relates to points earned with each purchase. Bonuses points on credit cards generally can be redeemed for everything from cash to airline miles or gift cards from retailers. Consumer cards generally have a rewards system that is designed for consumers, so the business owner may see more gift cards for restaurants, movie theaters and consumer-based retailers, such as home and bath stores. Business owners, on the other hand, can find cash-back rewards as well as rewards for office supplies stores, technology stores and other similar venues that businesses may use regularly. Some also have airlines miles programs. Keep in mind that many credit cards have a limit on the number of points that can be earned, and this will limit the power of the rewards program for the account holder. When selecting a business card based on the reward program, it is important to read the fine print and to learn more about the requirements, rules and limitations for the business card’s rewards program.
Maintain Separate Financial Records for Business and Personal Expenses
One of the main reasons why small business owners apply for a separate business card relates to record keeping and accounting. It is possible to charge all business-related expenses onto a consumer card. A business owner may even open a separate consumer card that is used solely for this purpose. This is one way to keep the records for personal and business expenses separated. However, when a personal credit card is used, all of the debt will be linked to the account holder’s personal name. This means that when applying for a personal loan, such as a home mortgage or a car loan, the outstanding balance, payment history and minimum monthly payment will be listed as a personal expense. When the business owner is the primary account holder on a business card, he or she will be personally liable for the debt on the business card. However, it will not be reported on a personal credit report or listed as a personal debt.
Access to Financial Tools and Analytical Features
Most credit card accounts today give the business owner access to at least a few financial tools online. For example, the owner may be able to log into all types of accounts online, view payment and usage history and make a payment. Redeeming points online and monitoring rewards program usage online is also possible. However, this is typically where the financial tools associated with a consumer credit card end. Business credit cards may have advanced features like the ability to itemize expenses for the year, to categorize them for easier accounting management and to view images of receipts so that the account holder can see exactly what was purchased and by which employee. In addition, many of these accounts can be linked with accounting and financial management software programs, such as Quicken or others. This can save a considerable amount of time and energy with financial record keeping efforts and can make it easier to manage funds. When there are different authorized users on the account, the account holder can also log in to simplify the management of the authorized users.
Enjoy Better Control Over Authorized Users
With both consumer and business credit cards, the account holder can typically add an authorized user to the account. Because consumer cards are designed to be used by individuals, the number of authorized users may be limited to one or two individuals in most cases. This is because an individual may need to authorize a spouse or perhaps a teenager or adult child to have access to the card. In a business setting, the number of authorized users may need to be higher. Most business card accounts enable the account holder to have many more authorized uses. Bear in mind that there typically still is a limit on the number of authorized users, so compare the limitations of different cards up-front before deciding which business card to apply for. In addition to having access to more authorized users on the account, most business cards provide improved control over those users’ usage. For example, the business owner may log into the account online to monitor spending on each individual account in real-time. It may also be possible to establish individual spending limits and even to turn access to the account on and off as desired. These are powerful and convenient functions that many business owners who will have authorized users on the account may prefer to have.
Access to Better Sign-Up Bonuses
Many credit cards for both business and consumer use have a sign-up bonus. For example, it is common to see a sign-up bonus for a consumer credit card that offers free balances transfers or a low introductory rate on new purchases for a period of time. The sign-up bonuses for a business card may be more lucrative in many cases, and they may also be more advantageous from a business standpoint. For example, some business card accounts will give new account holders tens of thousands of rewards points that can be redeemed immediately. Others offer special perks or incentives for a period of time, such as complimentary access to a VIP lounge in different airports around the world or discounts on air travel and rental cars. These can save businesses a small fortune, and they generally may be far more advantageous for a small business owner to use rather than the moderate perks and bonuses associated with a consumer card.
Each business owner many have unique needs and goals when opening a credit card account for the business. While applying for a personal credit card that is used solely for business expenses is one option, it is generally not the best option for most small business owners. Each of these benefits can be truly advantageous to a small business owner in different ways. With this in mind, many small business owners who are shopping for a credit card today may consider comparing the different types of business cards available.
- Where can I find good credit cards for new small businesses?
- Applied Bank Small Business Micro Loan Card
- CitiBusiness Card
- Where can I compare business credit cards?
- Lake Trust Credit Union Platinum Visa Business Credit Card
- Will your credit score improve if you are an authorized user on a credit card account?
- Do I need a new small business credit card?