You may not know it but often a business credit card brings personal responsibility. Business credit cards offer a variety of benefits no matter what size your business. Even if you have a small business – even a business where you are the only employee – credit cards can be useful in many ways. Here are a few things that you need to know about a business credit card vs personal credit card if you own a small business.
When you first start a business your business will not have credit of its own. Generally, to get a credit card you will have to personally sign, using your social security number and putting your own credit history on the line. As you grow your business and build the credit of the business itself you may eventually be able to procure cards in the business name alone.
The fact that a business credit card brings personal responsibility means a couple things: This is a benefit in that you can get credit even for a new business. It can be a negative in that you are personally responsible for business expenses.
Despite your having personal liability for your business card it may not show up on your credit report, at least not while you are actively using it and in good standing. This is good as it will not damage your credit by showing any high balances. But this may also mean that if you pay well it will not help you to build your own credit history. Of course, credit card companies know how to protect themselves, so if you default on the card it is likely that they will start reporting it and it will show up on your personal credit report.
Sometimes you can get a higher credit limit for a business card than you can for a personal card. This is because you may be able to report the company’s total income in the application rather than just your own salary.
One of the best reasons to have a business credit card is to track business expenses. This can make record keeping easier, especially as many companies will give detailed reports for business cards that show what categories money was spent in. This makes record keeping easy, calculating ROIs and other calculations easier, and can make tax time must easier.
There are many things you can do with business cards that are different than personal cards. For example, some business cards let you give cards business credit card for employees while setting different limits on how much they can spend. So, if you have one employee who only needs the card for gasoline you might set a low limit of $300 a month. But another employee who entertains clients might need $800 a month. By setting limits you can ensure that no one overspends.
Having a business card can also help you to build a credit history for your business, protect your personal assets by keeping business money separate from personal money, and more. One important note, however. Just as with personal debt, a business is stronger when it doesn’t have debt. Always strive to pay off your business debt in full each month to avoid paying interest and fees and amassing debt.
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