There are a number of differences between a business credit card and a personal credit card that a business owner should understand. While business credit cards may have some features that are appealing to a business owner, the cards are exempt from many of the consumer protections that personal credit cards provide. A business owner must carefully consider these differences to choose the card that best meets her needs.
Many business credit cards offer special payment plans that may be advantageous to a business owner, especially for new businesses that may be short on cash from time to time. Payment options will vary, but some common offerings include lower interest rates for quick payments, or small monthly payments to keep the card account current. Business owners must carefully read the fine print of the card’s terms to determine what payment options the lender offers for the particular card, and when these offers might change.
The Credit Card Act of 2009 works to provide protection to consumers from certain credit card issuer practices. However, the Credit Card Act of 2009 applies only to personal credit cards. For example, the Credit Card Act of 2009 restricts lenders to a $25 charge when the borrower goes over the credit limit, and the lender must give the borrower 21 days to make a payment from the date the lender sends card statement. For holders of a business credit card, there are no such protections. Some lenders may offer these protections to the business card holder voluntarily, but the business owner must carefully examine the card’s terms to make sure.
Many personal credit cards offer cardholders the ability to buy consumer goods and services at a discount, or via the use of points. Business credit cards do the same thing, but the goods and services are typically more business-related. Using a business reward card might also qualify the business owner for discounts on travel, accommodations and other business expenses with certain companies, regardless of accrued points.
Business owners may find that is easier to qualify for a business credit card than other types of business loans. A business credit card reports information on the business, allowing the business to establish a credit rating. Some business credit cards may also report information on the business owner personally. A personal card reports only on the cardholder, which will not help the business build credit. Many business credit cards provide specialized billing statements to give business owners information needed to account for different types of spending.