Find out all the advantages and disadvantages of using a business credit card, and see whether the pros outweigh the cons for your business.
If you have a small business, online or land-based, you’ve probably heard about business credit cards. Business credit cards are like consumer credit cards, meaning the business owner will have a business line of credit with a previously stated limit that can be used for making purchases that will help their business.
Business credit cards are also great for beginners who need funding for their business because they will give you the finance you need to get your business running without putting you in big debt. This doesn’t mean that you’ll get free money that you can use. On the contrary, you’ll be charged an interest charge if the balance is not repaid. The great thing about business credit cards is that it doesn’t have business limitations. It doesn’t matter if you’re a shop owner, a mompreneur who wants to build a business from home, a handyman who needs funds for tools, or just someone who’s looking for ways to fund his home daycare idea; you can all apply and get the perks of business credit cards.
Advantages of Using a Bussiness Credit Card
As we already mentioned, getting a business credit card is an excellent way to fund your business and help things run successfully. Let’s see what the advantages of using these types of cards are:
- It has easy qualification
While it takes a lot of time and documentation to qualify for bank loans, that’s not the case with business credit cards. If your small business is already established and you have decent personal credit, there are huge chances you’ll be eligible for the business credit card.
- You’ll get access to easy financing
A business credit card is a great option if your business needs a quick cash flow. If you have any previous experience as a small business owner, you probably know that there are times when your business needs an instant cash flow for a purchase. Business credit cards will save you trouble, and you’ll have the funds to purchase all the supplies and equipment you need to keep your business running.
- A business credit card will help you build credit
A business credit card will improve your business credit, which can be very beneficial if you ever need to apply for a bank loan.
- You can also get rewards
To attract more users, most business credit card companies offer generous rewards. People who use their business credit cards might get airline miles, earn cash back, and other excellent prizes.
Disadvantages of Using a Bussiness Credit Card
Although the business credit card can help you when you need cash flow, it also has many disadvantages. Always check the conditions before applying for any card. Let’s see some of the disadvantages of using a business credit card.
- You’ll face high interest rates
They might give you financial aid when needed, but that doesn’t come free. The reality is that business credit cards have high-interest rates and late fees, which are a really expensive way to finance your purchases. Also, some companies require you to pay annual fees for having the card.
- It can create personal credit issues
You must also give a personal guarantee when applying for a business credit card. You must give your previous credit history and social security number to qualify for the card. This can cause credit problems because your business activities will be reported on your credit.
- You might experience security issues
If your card gets stolen, it can be used for fraudulent actions. Therefore, keep your card safe and don’t tell anyone your credit card number. If you don’t monitor your card properly, you can end up with security issues, and nobody wants it.
- You will have less purchase protection
You’ll have guaranteed purchase protection with a personal credit card. On the other hand, purchased protection is not guaranteed with business credit cards, and it will be more difficult to reverse fraudulent charges, correct billing errors, or return purchased items.
Business credit cards are great for:
- Freelancers
- Small business owners
- Large business owners
- Corporations
- Sole proprietors
Before applying for a business credit card, consider the advantages and the disadvantages and decide whether this card will benefit your business.
Conclusion
Although most people think that business credit cards are the same as personal credit cards, there are some differences between them, and every business owner should know them. A business credit card is a great way to get a cash flow or buy supplies and equipment to keep your business running smoothly.
Most business owners prefer these cards because the application doesn’t take long, and most small businesses with good credit are eligible for them. Nevertheless, using a business credit card has disadvantages, so make sure you know everything before applying and see whether the condition suits your needs.
