Businesses large and small can apply for credit cards under the business name. Like consumer credit cards a business credit card is subject to finance charges and other fees and in most cases there will also be a preapproved credit limit on the card.
Business owners gravitate towards the use of business credit cards as they provide a way to separate business spending from personal spending. Aside from this the business owners can apply for the type of card that will be most beneficial for their businesses, they will be given flexible payment options, track spending and get rewards for their spending. Finally the credit limits on business credit cards are usually larger than those given with consumer cards which will be a good advantage to have in any business.
It is important to note that there are some other important differences between business and consumer credit cards. They are outlined below.
Business Credit Card Providers Can Raise The Rates Whenever They Choose
Consumers do have some protection from rate increases due to the CARD act. For consumer cards a 45 day notice of rate increases must be given and the new rate will only be applied to new charges. Business credit card accounts are not given the same courtesy. The rates can be raised without prior notice and any changes in the rates will apply even to existing balances.
While some business card providers will follow the same guidelines for consumer credit cards by giving notice and not applying the new rates to previous balances they are not obligated to do so.
Less Time To Pay Your Bill On Business Credit Cards
The CARD act dictates that issuers need to mail the bill at least 21 days before the due date. Business credit cards are not governed by this act therefore business card providers are not required to follow this rule. Again there are some providers like American Express who give business owners the same 21 days after the statement date to make their payments.
The important thing here is that business owners must check the providers’ terms before they submit their applications.
Watch Out For The Late Fees
There is a $25 cap on late fees for consumer credit cards but with business credit cards there is no cap. This is why it is important to stay on top of all notifications and read the terms carefully before you apply. Make a phone call and ask about the due date, late fees and how long before the due date is the bill mailed.
Monitor the Credit Card Spending Limit
You need to carefully monitor your credit card limit as a business owner since business credit card providers could easily let you go over the limit without prior permission and then charge you an over limit fee. This is a stark difference from consumer credit cards where permission is required by the consumer to allow charges for going over the credit card limit.
Payments May Be Applied Differently
If you are carrying two balances on a consumer credit card any payment over the minimum payment will go to the balance with the highest APR. With business credit cards this might not be the case. Some business credit card providers will apply any excess payments to the balance with the lower APR while others may do just the opposite. This is an important question that you need to get the answer to before you choose a provider.
You Will Need To Provide Information About Your Business
Expect that the business credit card provider will need you to provide information about the nature of your business. You might also need to share your financials and some details that will allow them to look into your personal credit as well.
Expect Business Type Rewards With Your Business Credit Card
Get a business credit card that also provides rewards and you will get a huge opportunity to save on business expenses. Choose the type of reward cards that will most benefit your business and you could save thousands of dollars annually.
Built In Features To Manage Accounting
Business credit cards include options to get detailed records of spending and statements classified according to specific categories. This makes it much easier for accounting at the end of the year.
Business credit cards differ from consumer credit cards in so many ways but if managed wisely will be of great benefit to business owners who are seeking to build up their small businesses.