When choosing a credit card for your business, you should consider the advantages of both general consumer and small business credit cards because even though small business credit cards have the word ‘business’ in their name, they are not necessarily the best vehicles for business spending. Such a fact proves true because of both the debunking of a popular myth and the passage of legislation that has altered the make up of the credit card industry.
Many small business owners believe that business credit cards protect them as individuals from any financial struggles their companies may endure by placing liability on the businesses themselves. They, in turn, believe that personal credit cards leave them vulnerable to such liability and therefore represent a dangerous option. However, small business owners are personally responsible for the debt incurred on their credit cards irrespective of whether they are using business or general consumer products because, in the minds of lenders, these individuals essentially are their businesses.
If you doubt this, just think, did your issuer require your Social Security Number when you applied for your business credit card? The answer is most likely yes, and that should serve as a pretty good indication that you will be held personally liable for the card. Therefore, there is no difference in terms of your personal obligation for general consumer and small business credit cards.
Where they do differ is in their protection under the new credit card law (Credit CARD Act) that fully took effect on Aug 22nd of 2010. Business credit cards were excluded from the Credit CARD Act, and therefore do not have the same protection from unexpected APR increases or extensive penalty fees that general consumer credit cards do.
Due to this protection, it is wise to use a general consumer credit card for purposes such as funding (i.e. when you have to carry a large balance). Using a general consumer credit card ensures that the credit card company will not increase your APR on an existing balance unless you are a full 60 days delinquent. This will offer you the predictability you need when making long-term financial decisions for your business.
While general consumer credit cards are the best choice for carrying a balance, business credit cards are the best choice for transactions that you will pay back in full right away. Business cards offer advantages such as higher credit lines and the ability to give cards with different limits to employees, which you can then earn rewards on. Such capabilities make business credit cards much more effective that their general-use counterparts in terms of purchasing power and tracking expenses.
Using a combination of the two will ensure that your business makes the most of what each type of card has to offer. Good choices for general consumer credit cards that offer a competitive introductory rate on balance transfers are the Citi Platinum Select MasterCard and the Capital One Platinum Prestige Credit Card. Two good options for small business credit cards are the Plum Card from American Express OPEN and the Chase Ink Cash Business Card. So get both a general consumer credit card and a business credit card so that you may take firm control of your business spending. After all, it is hard enough to make a small business work without having to face unexpected costs.
