Merchant Credit Card

Merchant credit card is an essential aspect of any small business or large corporation. Businesses should take the time to find the perfect merchant card! Businesses have to establish and maintain good credit in order to be able to successfully obtain loans from banking and lending institutions. The key for businesses is to understand is that they need to obtain credit when they do not need it, so that they will be able to receive loans to expand their company in the future. It takes time to develop a good credit rating as a business, but the longer that they wait to start the profile, the more difficult it will be to get loans. If you are a business owner, take the time to get a FREE credit report and make sure you are getting the best credit card with our tool!  Continue reading below for the best tips on Merchant credit cards!

Merchant credit cards are really the only option for businesses that see themselves as moving beyond the small business phase because actually the use of personal credits for business is rather risky. If a business owner decides to use their personal credit cards for business purposes, then they will become personally liable. Any time a business owner uses a their personal credit cards and accounts, they will increase the likelihood that someone could pierce the corporate veil in the event of a lawsuit. It will also cause them to be personally liable for the payments if the business is unable to make the payments and it may allow creditors to pursue the personal assets of the owner as well. Business owners should look online for business credit cards and find the best one for their particular small business!

Merchant Credit CardsIt is for this reason that the are credit cards that are specifically designed for businesses and their credit ratings only apply to the business and the not business owners. Lending institutions will consider the credit rating that the business has developed over time through the use of the merchant credit cards and hopefully they will show that the business does have the potential to pay back the loans.

Description of Merchant Credit Cards

Merchant credit cards function almost like consumer credit cards, except that they usually have much higher credit limits and they are only used for business purposes. Merchant credit cards can be used to purchase services, equipment and accessories that the business will need like vehicles, real estate properties and even new lines of credit with other businesses. Merchant credit cards can also be issued to individual employees who may need the card to cover certain business expenses (usually travel expenses) as well. That type of card will display both the company name as well as the name of the individual employee. There are even smoe possibilities at receiving business reward credit cards!

These cards do not hold the employee liable, but if they decide to use the card for fraudulent or unapproved purchases, then they could be hold responsible and it would possibly have a reflection on their personal credit rating. Credit limits for merchant credit cards can be any where from 50K for small businesses and expand to figures far above $5 million for more larger and more established companies. The credit rating of the company will be based on the total amount of credit available to the company, the amount of credit that they have used as well as late payments. If the companies credit rating becomes low, there are many credit score tips that could help save the company!

How Companies Can Get a Merchant Credit Card

Any company can apply and obtain a merchant credit card, but the process will be different depending the size and type of company. Many different entities such as government organizations, nonprofits, small businesses and large corporations are eligible to obtain merchant credit cards. Major credit card companies such as Mastercard, Visa and American Express offer merchant cards to small and large institutions alike. For small businesses, there are a number of cards advertised in the media such as the
Plum card from American Express and they all come along with some standard rules, regulations and terms of use. Any small business can apply for this type of card online through the merchant credit card issuer’s website.

The small business credit card will be issued in the name of the owner of the small business, but both the owner and the business will be held accountable for the payments. However, the process is completely different for a major corporate, nonprofit or government entity. Due to the size and scale of these organizations, the process becomes even more complex due to the fact they have so many employees and a much higher credit limit.

These types of organizations cannot apply for the cards that they offer online because their cards will be custom made to fit the needs of their organization. These types of organizations usually go directly to the issuer and negotiate a special agreement to create the card with terms and allowances that will work for them. For these types of accounts, there must be customized database software present in order to properly track expenses of the employees and there must be a certain amount of oversight as well from an accounting department.

Small Business Credit CardAdvantages of Merchant Credit Cards

There are many advantages to using a merchant credit card because their terms and conditions are drastically different from those of the consumer credit cards. Know what you need to know for credit cards and really understand business credit card tips to help you with any situation! Generally, most businesses like their merchant credit cards and they do not usually have a lot of horror stories that consumers talk about. Merchant credit cards are really like an asset to their business if they know how to use it properly because they offer a lot of advantages. Here are some key advantages of merchant credit cards.

  • Flexible Payment Options - Merchant credit cards often offer more special payment options for businesses because their accounting is different from consumers. They are usually able to have some special payment plans designed to help businesses account for their spending in certain ways. Consequently, they can obtain more detailed records of the spending as well to show for tax purposes.
  • Better Rewards and Perks - Merchant credit cards usually offer business perks and rewards just like consumer credit cards. These rewards are geared toward business related products and services or they could amount to something like frequent flier miles.
  • Higher Credit Limits - Obviously, merchant credit cards generally have much higher credit limits because businesses need to spend a lot more money than regular consumers. At the low end, amounts can be anywhere from 10K-250K for small businesses and they can increase to millions of dollars for large corporations or government entities.

Disadvantages of Merchant Credit Cards

There can be some disadvantages to Merchant credit cards. Take a look at a few of these possible disadvantages:

  • More Company Scrutiny- The company may be scrutinized by the card issuer to ensure that they are credit worthy. Admittedly, some card issuers do not require that much information and the application may resemble that of a consumer credit card. Most small business owners that apply for merchant credit cards for the first time will only complete a standard application that will not probe too far into their business and the process is relatively quick and simple.However, as the company grows and requests higher limits and privileges, they will begin to research the company more thoroughly and hold them to a higher standard. They may request financial documents from the company regarding net income, assets, liabilities and equity. They may even consider the pay of the executives and the other employees at the company. If the company already has some sort of credit record, then they will also take that into consideration as well. Basically, they will want to see the complete picture of the company and they may reduce the credit limit or impose certain types of restrictions if they see that the company is not managing their money efficiently.
  • Requires More Oversight - Large corporations do not have to worry about this, but small business owners need to make sure that they are ready to use the card responsibly if this is their first time. As a small business owner, they can still be held liable for the charges if the company fails and a default will go on their personal credit report, so they need to make sure that they are prepared to manage their money and responsibilities.
  • More Rate Increases - Unlike consumer credit cards, merchant credit card issuers are not required to follow by the rules of the CARD act, which requires them to give at least 45 days notice before a rate increase and also requires them to only apply the new interest rate to previous charges. Given that merchant credit cards do not follow those regulations, business owners are more susceptible to interest rate increases and the new interest rates will apply to both past and future charges on the card. Some card issuer’s will try to give some notice about the rate increases, but they are still not obligated to do so. This is usually not a problem for many larger entities, but small business owners should be sure that they are prepared for any potential increases.
  • No Limitations on Fees - Unlike consumer credit cards, there is no limitation on over limit fees or late fees for businesses. Usually a business will be able to continue to go over the limit and amass more fees because they have a greater ability to pay the amount back. Late fees can also continue to accrue for businesses as well, so they must be careful about how they use the card.

Compare Merchant Credit Cards

Merchant credit cards are great for both large entities and small businesses alike as long as they understand how to use the cards responsibly. Small business owners should consider both the advantages and disadvantages before they apply for a card because it is not a free lunch. These cards require more oversight and accountability on behalf of the owners and they will ultimately be responsible for how the cards are used, even if an employee makes unapproved charges on the account. Choose credit cards that will help your business in the long run!

Once the company is on solid ground, then they can safely consider these cards and build a good credit rating and profile for the company to be eligible to receive loans down the line. Compare credit cards for FREE with our Chaser Comparison Tool!

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Disclaimer: This content is not provided or commissioned by American Express, Visa, MasterCard, Discover, or any other credit card company or issuer. The opinions expressed here are the author's alone, not those of any credit card company or issuer, and have not been reviewed, approved or otherwise endorsed by any credit card company or issuer. Credit Card Chaser may be compensated through various affiliate programs with advertisers. As always, Credit Card Chaser is an independent website commmitted to helping people research credit card offers and find the best credit card!