Firstly, I would like to thank Joel for giving me the opportunity to guest post on his blog. Today, I am just going to write briefly about why I chose a credit card for my business and perhaps explain some nuances of credit cards that are specifically targeted at small businesses.
Using a Personal Credit Card for Business Expenses
For the longest time, I used the Amex Platinum Card for all my business expenses. Because I charged more to my business than I ever do for my personal expenses, it seems to makes sense to do it this way. I get to earn lots of reward points and I could happily use them to get a couple of free flights here and there for myself and Mrs Credit Card.
Getting a Real Business Credit Card
There was just one problem with this arrangement. Occasionally, it made sense for us to use our business credit card because of some urgent point requirements or some discount offers that we got from the mail. That essentially messed up our credit card statements when we tried to download and sort things out in Quicken! It became really messy. I then decided I should get a proper business credit card. At the end of the day, I ended up choosing the American Express Plum Card.
Small Business Credit Card Truths
There are a few misconceptions about business credit cards that folks get confused all the time about that I want to clarify. Here are some truths about small business credit cards that you should know:
#1 You need good personal credit to get a business card – The way business credit cards are granted is really based on your personal credit. Hence, when you apply for a business card, there will be a hard pull on your personal credit. Hence if you do not have a good credit, you are unlikely to be approved for a business credit card.
#2 Business credit cards affect your personal credit when you default or are really late on your payment – However, one you are approved for a business credit card, your monthly payments will be reported to business credit bureaus. These may include Dun and Bradstreet, Experian Business etc. So, in a very funny way, even though you need a good credit to get approved for a business credit card, it does not help your credit profile once you are approved! But if are ever late for any payments or default on your business credit card, these will be reported to your personal credit bureaus!
#3 You are personally liable for any business credit card debt – Because any late payments and defaults are reported to your personal credit bureaus, you are actually personally liable for your business credit card debt even though you think it is a “business credit card”. The only types of business credit cards that are not tied to your personal credit are corporate credit cards. But for these, your business needs to be of a certain size and you need a certain number of employees to get one for your company.
#4 You can get a business credit card even if you have no business! – Yes, you heard that right. Because you are actually personally liable for the card (and not your business), technically, you do not need a business to have a business credit card. All you need is to give your social security number. If you do not provide an EIN number, you will simply be considered a “sole proprietor”.
If you have a small business, it makes absolute sense to get a separate business credit card for your business just to keep finances separate. But be aware that you have to make sure you pay your bills on time because it can hurt your personal credit. But more importantly, choose the right card to save the most money for your business.
- Small Business Credit Card Application Tips
- What are the usual small business credit card rates?
- How do small business credit cards work?
- Should You Get a Business Card or a Consumer Card?
- Firstmark Credit Union Business Visa Platinum Credit Card
- First Financial Federal Credit Union of Maryland Business Visa Credit Card
- Is it possible to get nonprofit business credit cards?