Business Credit Card Comparison

Thursday, June 7, 2012 at 4:10pm by Site Administrator

Comparing Personal and Business Credit Cards

Business should never be personal, especially when it comes to finances. There’s nothing more jeopardizing than long-term use of personal funds to keep a company going.

This definitely applies to funds set aside for a start-up. It’s important to keep these monies separate from money used to buy groceries and gas. Maintaining separate business and personal checking accounts is the sensible alternative. And the long-term goal has to be reducing and eliminating reliance on personal cash to finance the business.

Credit cards need to fall into the same category. These may be powerful financial tools and vital to building a business, but they can be detrimental tools as well. This is particularly true if one is trying to maintain a new business in what are obviously volatile times. Cash can be stretched thin quickly. Supplies and equipment can reasonably be purchased on credit, leaving monies for payroll, insurance and wealth building.

There isn’t a business in the world that couldn’t be helped by a line of credit. A lot of new companies dig in with the use of personal credit cards, often not even considering a business credit card. Many people aren’t aware that they may be eligible for one.

If one is going to run a business, a card specifically for that operation is a logical step. Like a personal credit card, a business card should be used with responsibility and caution. Debt is debt is debt. Again, like a personal credit card, handling a business credit card sensibly presents the possibility of greater funding opportunities.

A business credit card helps protect your personal credit history. Using personal cards for business will lead to credit bureau reporting that could unfairly affect your credit – meaning your business debt will be part of your credit score. No one wants or needs that headache. Plus, the idea of building your company’s creditworthiness should be paramount. Having a separate credit card will do that.

Using a personal credit card for business can be a bookkeeping nightmare. Distinguishing personal and business expenses for the purpose of locating tax deductions, or preparing budget planning, will strain the eyes. It would be easier to have a business account where all spending falls into the same category. Also, detailed credit statements will be received for tax purposes, definitely saving time.

Keeping business credit card accounts makes tracking employee spending easier, especially for a small business. It’s time for the days of waiting for payment approval on business transactions to go the way of black and white television. That slow process holds up routine purchases and bill payments, and worse, requires a signature. More work.

It might be prudent to issue individual cards linked to the business account. This will get things done faster and the statements will be itemized and divided by employee. Look forward to a simpler process, easy viewing to monitor employee spending and more organized financial records.

Business credit cards will have higher credit limits. This allows major purchases that a personal credit card or cash can’t handle. In times of an emergency, it can’t be stressed how important this can be. No business needs to hold up production for lack of funds.

The CARD Act

The Credit Card Accountability Responsibility and Disclosure Act of 2009’s intent is to protect the consumer from unfair and transparent acts conducted by the credit card industry. It includes provisions limiting the way credit card companies treat consumers, including protection from arbitrary interest rate increases, misleading terms and excessive fees.

Business credit cardholders were disappointed to find they were not included under these protections. Without them, they could still look forward to spontaneous rate increases, unwarranted and unwanted changes in consumer rights as rewritten by their creditors and sketchy practices.

This has led many businesses to contemplate whether personal credit cards might be the way to go. Businesses are weighing the benefits and protections that come with the CARD Act against their current high interest rate situations. This, of course, opens up the very threat of not keeping business and personal finances away from each other.

In the long run, it might be practical to stick with the tried and true. Again, the overall goal should be to move away from personally financing your business.

Hopefully, in time, other banks will follow Bank of America’s lead and voluntarily apply the CARD Act to business credit cards.

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