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Business owners like the flexibility of a dedicated business credit card and often ask what are some easy to get business credit cards? A business’s credit history, like that of an individual consumer’s credit report, affects the kinds of business credit cards for which the business may be approved.
What type of business credit card is likely to be the easiest to get?
In a challenging economic environment, many lenders tighten access to credit. Delaying purchases, paying vendor accounts slowly, and other cash-conserving strategies may lower a company’s credit rating. A secured business credit card offers your business with access to a credit line, and usually offers a lower interest rate than an unsecured business credit card.
By providing collateral—cash, securities (stocks and bonds from other issuers, or securities from the company seeking a business credit card account), real estate, or other assets—the credit card issuer’s line of credit offered to the company is secured. That is, if the business defaults on the credit line in the future, the issuer may recover the capital extended.
To determine the best secured business credit card:
- Discuss options for a secured credit card with the company’s primary commercial banker
- Compare any fees charged by the issuer and the annual percentage rate (APR) charged on balances
- Identify any rewards programs offered by the issuer
- Read the fine print: a low introductory credit card APR may change to a higher than market interest rate after the introductory period
- Determine whether programs offered by the issuer, such as identity theft protection, add value to the business credit card program
- Build a better business credit score with a secured business credit card
- After six months to one year, ask your issuer to reduce APR or other fees associated with the business credit card
As of November 2011, the Federal Reserve noted that commercial banks are making fewer business loans in light of credit and cash flow standards. According to Experian in a report released in October 2011, one of the three major credit-reporting agencies, businesses are taking longer to pay bills. The largest businesses (with 1,000 plus employees) show the most marked increase in late payments: these companies’ late payments increased by 28% in 2011 vs. 2010.
How does a business credit card differ from an individual consumer credit card?
According to author Clark Howard in “Living Large in Lean Times,” business credit cards don’t offer companies the same protections as those offered by consumer credit cards (under The Credit Card Act or The Truth in Lending Act). Here are some of the ways business credit cards differ from consumer credit cards:
- Your business credit card issuer can increase the APR without giving the required 45 days’ notice that consumer credit cardholders receive under the CARD Act. Some issuers, such as Bank of America and American Express, announced their willingness to treat business credit cardholders to the same notice periods outlined by the CARD Act.
- Your business credit card issuer may increase the introductory APR at any time. Consumer credit card issuers must offer the introductory APR for a minimum of six months.
- Your business credit card issuer may give you fewer days to settle the account. Consumer credit card issuers must provide a minimum of 21 days to pay the bill.
- Your business credit card issuer can determine the late fee amount to charge on past due balances. Consumer credit card issuers cannot charge more than a $25 late fee or the minimum payment on the account.
- Your business credit card issuer can also name the level of “over-limit” fees to charge for balances over the credit line.
- Your business credit card issuer may apply payments to the lowest interest rate balance (allowing higher interest rate balances to accrue interest), unlike a consumer credit card issuer (where the opposite is true).
- Your business credit card issuer may not always report payments made on time as agreed. If the business credit card pays slowly or defaults, a bad credit record may also appear on the business principals’ consumer credit file.
- Your business credit card issuer may offer ustomized payment plans or a discount on the total due if paid within a certain period. Other business credit cards may provide additional accounting detail to assist the company with record keeping.
Should a small business use business credit cards?
Building credit for a business is important, and opening a business credit account can help businesses gain access to capital and credit in the future. Capital is necessary to maintain the company’s operations or to expand the business.
In addition, your business credit card issuer can extend cards to multiple company employees. Streamlining the company’s expense records is one of the benefits of a business credit card. Higher credit card limits, customized payment plans and accounting reports, and industry-specific rewards programs may also make the business credit card beneficial to the company’s bottom line.
Starting with secured business credit cards can help companies lower the costs of credit and to build a business credit profile. Awareness of how business credit cards differ from consumer credit cards can help business principals choose wisely.
Initiate your request for information about business credit cards that best suit your business and needs with the credit card chaser now!
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