Credit Cards for Small Business

Wednesday, June 13, 2012 at 3:30pm by Site Administrator

The Small Business and Common Credit Card Issues

Applying for a business credit card, especially if you’re a small business, isn’t a complicated process. It’s as easy as applying online and getting a response within minutes. But a small business needs to be careful. It may not have the financial backing to withstand a hit to its credit foundation. Like a personal credit card, acquiring a business credit card can be a risk if not approached and handled responsibly.

There are a number of common credit card issues faced by small businesses. All can be avoided if approached with a strategy and understanding the business of credit processing. Not all obstacles will apply to all businesses. Even a brief conversation about potential problems with a financial adviser can be beneficial.

The CARD Act

Small business is still reeling from the impact that the CARD Act has had on the market. While it protects consumers on the personal side, it’s done nothing to regulate the small business credit card industry. These businesses are left with uncertain polices and prospects with no hope of reform. Lobbyists have argued that allowing small business credit cards the protections given consumers would somehow curb credit services. i.e., as small business is a risky venture anyway, issuers would cut credit and raise rates if it’s believed these can’t be adjusted at their leisure.

It can only be hoped that more banks follow the lead of some of the larger financial institutions, which have volunteered to apply the protections of the CARD Act to their business credit cards.


Can you afford it? Too many of us dive into credit cards believing it solves problems. The issuer doesn’t care about your debt or the problems that come with it. They expect you to fulfill your payment obligation. Assess the risk of using credit to finance your business. How much can you afford to pay off on a credit card schedule and how long will it take? It’s easy to convince yourself you can handle it until you realize you can’t.

The Issuer Has All the Power

Financial institutions can raise an APR whenever they choose and apply the new rate to an existing balance. This is completely unfair but a part of the process. See if the issuer has a policy about this practice. Do they give their customers advance notice? How much of a notice? It might be time to move to another card that has a lower rate and no transfer fee. Even then, consider if you can pay that balance in a timely manner.

Other Common Issues

A small business, especially a start-up, will always face the hurdle of credit’s Catch-22. You need a credit history to get a business credit card but you need a business credit card to build history. Often, you’re looking at starting out with a card that has a low credit limit, which will still be higher than a personal card. There’s the possibility of a higher interest rate. Try to stick it out. In a year you may have built enough assurance in your credit worthiness to advance to higher balances and lower interest rates.

Do not go with any card that requires a personal guarantee. This is usually something a person with horrible credit has to do, but other options should be researched first. The whole purpose of having the business credit card is to avoid co-mingling personal and business expenses. Regardless of your confidence, anything can happen and the last thing you want is business debt on your personal credit record.

Small business can be more susceptible to credit card fraud. Desperation can lead to signing with the wrong issuing bank, making agreements that the bank has no intention of fulfilling. Going overseas can be problematic. It can look like the sweetest deal on paper, but you could find yourself a victim of enormous interest rates, iron clad commitments and unreasonable fees. And even the sleaziest operation can defile your credit report. The best avenue is to go with a known commodity in the financial market.


Get all the advice that you can. There are consumer and small business groups ready to counsel you. The internet offers constructive information that can be used before taking the first step. Speak with others in similar businesses and use their experiences.

Getting a business credit card is a simple process, but needs to be done to your advantage. This is possible with foreknowledge and responsible planning.

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