Do you need a credit card for your business expenses? If you are not sure whether to choose a personal or business credit card, you should be aware of some differences before making your choice. For example, personal credit cards offer a few protections that business cards do not.
Although you can use business cards for expenses, personal credit cards are still considered when applying for them. You will still be personally liable for any debt you amass on your card on most business cards. Finally, yet importantly, you do not need to be an actual business owner to qualify for a business credit card: contractors and freelancers can also apply.
In most cases, you only have to give your Doing Business As (DBA) name. To classify yourself as a sole proprietor during the application, you should use your name and social security number. Here are the pros and cons of using business or personal cards for your small business:
Pros of business credit cards
The most obvious benefit of using a business credit card is to separate your business and personal transactions easily. As a business owner, you must know how frenzied tax time is. Are you sick of shuffling through statements while trying to differentiate between business and personal expenses? With business cards, you will not have to do this anymore.
A business credit card is equipped with tools to help you categorize and organize your business spending. Do you want to get multiple cards for your employees? Doing so will streamline your spending. Business cards have a much higher credit limit than personal ones.
Some business cards come with special repayment terms. If you prefer credit card churning, you should know that applying for a business credit card is much easier than applying for a personal one. For instance, if you have several personal credit cards with a single bank and want another one, try applying for a business credit card.
Moreover, getting reward points with business cards is much easier. Just be sure to watch out for annual fees, as they can be higher for business reward cards.
Cons of business credit cards
Applying for a business credit card is sensible, but you need to read the fine print first. While personal cards give a 21-day window to repay, businesses do not, and your due date changes from one month to the next. Personal credit cards notify you 45 days before your rates go up, while business card rates could change overnight.
The same also applies to introductory rates. Those for personal credit cards are offered for at least 6 months, while business card introductory rates can be pulled at any time. Moreover, some companies do not include business credit histories on your personal history: the two are handled separately unless you make a mistake on your business credit card.
Therefore, if you want to improve your credit score business cards are not the best option.
Using personal credit cards for business expenses
Does using a business card seem too volatile? Consider sticking with your personal credit card. If your business is not large enough to make the rewards system worthwhile, opt for personal cards. Although you can use both cards, using a business credit card is more beneficial.
Opening a business credit card calls for increased vigilance: setting due date reminders and trying not to carry a balance. As long as you use it well, you will benefit from a business card. You should check out a first-time credit card holder review to learn how to use your card.