Benefits of Business Credit Cards

Need to get that inventory soon but no cash at hand – try business credit cards. They’re easy to sign up for, simple to use and can be a ready source of credit when you face a cash crunch. That’s a big bonus for your business – especially if it’s a small start-up you own. Let’s take a look at some of the benefits and some of the negatives of these types of credit cards.

Business credit cards no doubt offer flexibility in getting cash when you’re strapped for money. However, just like any credit card, it isn’t the best source of money – as we all know. The thing with credit cards used for business is that somehow, personal and professional monetary requirements seem to get entangled. Here’s why:

• Defaulted payments:

  Just in case your business has defaulted on payment, then the credit card company is going to come after the person who signed up for it. This is a prerequisite that a person needs to agree to, before signing up for any business credit card.

• Credit score:

  While you will definitely try avoiding any chances of late payments from your business, there may be the occasional slip-ups. This can affect the personal credit score of the person who signed up for the card. This makes your credit rating weaker, for no fault of your own.

• Fraudulent transactions:

  There is one significant difference between a credit card for personal use and one for business purposes – in the way fraudulent transactions are handled. For personal use credit cards, customers are free to register a complaint with the credit card company on any disputed transaction on the statement. However, business credit cards do not offer this flexibility.

• Damaged goods:

  Let’s say you’ve purchased new stock of inventory for your business. You soon realize some of the goods are in damaged condition. If you had used your personal credit card for the transaction, chances were, you could have asked for a refund for these damaged goods. If the vendor refused to cooperate, you could ask the credit card company’s help. However, in the case of a business credit card, the credit card company chooses to stay a neutral 3rd party and does not get involved in the disputed transaction.

Now that you have a fair idea on the risks associated with business credit cards, it’s time to sit back and relax – because a business credit card offers you significant advantages to help your business. I will go over a few helpful tips when dealing with these types of credit cards.

Here are some tips that will help safeguard your safety. These steps will ensure that your personal and business finances do not get mixed.

• Business credit bureaus:

  These are different from consumer credit bureaus. These solely focus on businesses, the sources of income, the financial standing of businesses, etc. Registering with a business credit bureau will enable you to position your business better.

• Personal finances:

  It pays to organize your personal finances. The reason being that most startup companies do not have adequate finances. Hence while signing up for a business credit card, if your business does not have adequate funds, chances are your personal finances are going to be used. Therefore your rating etc will be placed in the personal credit report. Organizing personal finances and paying off liabilities will help to stabilize your personal credit rating and even the financial health of your business.

• Shopping for a business credit card:

  While choosing a business credit card, make sure to assess your own financial goals first. Things like the period of repayment, whether the bank will accept payment in installments etc. Next, you also need to check out if the credit card company provides you with cashback, discounts while shopping, etc. These are extra perks that help save money. Since this is for your business, your employees may need more business credit cards. Check if the credit card company provides additional free cards.

Business credit cards can be your best friend or your worst enemy – it all depends on how responsibly you use them.