If you are starting or already running your own small business and want to separate your business purchases from your personal expenses, you may consider applying for a business credit card.
According to experts, business credit cards often offer better benefits than personal cards, such as discounts, airline miles, or higher cashback rates. Some even offer business advice to customers.
You don’t have to be a big company to apply.manyUse your corporate credit card. Regardless of the structure of the small business, it is worth considering whether to get another business credit card.
Learn how to get started.
What is a business credit card?
Business credit cards are much like personal credit cards, but offer more options for businesses of all sizes, says Daniel Harrison.Founder of Harrison Financial Planning in Columbia, Missouri. There are many reasons why you might want it for your small business.
“You can set authorized users and usually set different settings for employees,” Harrison explains. “For example, an employee can spend up to $ 500 a month. It’s more manageable than a personal credit card.”
What is a business credit card used for?
Business credit cards help you track expenses, pay for your day-to-day business needs, and provide the ability to earn more profit than your personal card normally offers. It can also help you separate your business operations from your personal finances.
Here are some other reasons to apply for a small business credit card:
- You want to separate your professional and personal finances
- Travel frequently for business
- You are interested in getting better profits
- I want to issue a card to an employee
- You want to track most of your daily business expenses
In some cases, you can use a regular small business credit card. For example, if you are a sole proprietor or a freelancer who does not intend to expand, your business card may not make sense.
How do I qualify for a small business credit card?
Most small businesses can qualify for a small business credit card. This includes sole proprietorships, LLCs, partnerships, and various types of companies.
Even if you haveIn addition to your regular work, we recommend that you consider applying for a business credit card.
According to Harrison, business credit card issuers may look at your personal income or assets, or those of your family or couple, especially if you are just getting started.
How does a business credit card work?
Business credit cards work much like personal credit cards. This card can be used for expenses, consumables, contractors and other needs.
Experts recommend paying the card monthly if possible. Indeed, interest rates are often double digits, much higher than small business loans.
Blaine Thiederman, Certified Financial Planner and Founder of Progress Wealth Management near Denver, said: “If you want to grow your business as quickly as possible, you can’t just throw debt on the wall and expect them to make good decisions.”
If you need long-term credit, consider a multi-year small business loan that offers low interest rates, Tiederman suggested.
Do I need an EIN on my business credit card?
In most cases, you will need to obtain an Employer Identification Number (EIN). This separates business transactions from social security numbers and personal finances for taxes and other purposes.
Pros and cons
Here are some of the pros and cons to consider when thinking about business credit cards:
- Business and personal finances are separated by different IRS identifiers
- Can issue cards to employees
- Business credit cards make it easy to track your expenses
- In general, benefits such as cashback and travel benefits are better than personal cards.
- When financing is needed, credit card interest rates are often much higher than other types of debt financing.
- If you are just starting out with a small business, you may need to co-sign a business credit card that will save your life and endanger your personal property.
- It’s easy to get a loan right away with your credit card.
Do you have too many credit cards?
It depends on the income generated by your business.
“It’s about your income, your sales as a business, what you can buy. It’s about what’s wise and responsible,” Tiederman said.
“If you have three or four different credit cards as a business owner and you’re making the most of them, that’s probably not a good decision. You have three or four credit cards and before you earn interest. If you repay everything at the end of the month, that probably means you’re on track, “Thiederman added.
Does a business credit card check personal credit?
This is generally the case, especially if your business is not yet well established.
“Business credit cards are often based on the owner’s credit history,” Harrison said. “People think,’Oh, I can get a business credit card and they don’t see all my personal information,’ but they do. »»
This is because the business card issuer will eventually ask you, the owner, to pay collateral or debt. In addition, Harrison says the owner is responsible for employees who are authorized users of the company’s credit card.