10 Reasons to Get a Small Business Credit Card

January 26th, 2009

During this financial crisis and deepening recession, many have been complaining and calling for credit card policy reform, and new legislation has already been passed to eliminate what many considered unfair practices involving rate hikes and fees. However, we shouldn’t forget that many small businesses have always used business credit cards wisely, and continue to reap a variety of benefits without any adverse consequences. In fact, many small businesses rely on business credit cards to run their business, and, for responsible business owners, there are many advantages. A business credit card:

• Separates your personal and business expenditures. Mixing your personal and business expenditures can lead to money management problems and confusion come tax time.
• Tracks and organizes business expenditures. Many credit card companies provide a year-end statement that itemizes and categorizes business transactions. A business credit card can act as your bookkeeper.
• Offers a higher credit limit. In general, business credit cards have higher credit limits than personal cards.
• Offers lower interest rates. Business credit cards often offer lower interest rates than personal credit cards.
• Builds business credit. Now more than ever, it’s important to build good credit before applying for a bank loan or any other line of credit.
• Manages employee spending. Monitor employee expenditures by having them use a business credit card with a preset limit.
• Offers rewards. Business credit cards offer a range of rewards, many of which are especially useful to businesses, such as office supplies, travel, software, or even phone services.
• Legitimizes and promotes your business. A business credit card helps legitimize your business in the eyes of the IRS, as well as those you do business with. And every time you flash your business credit card you are promoting your business.
• Protects and insures. Many business credit cards offer extra protection for you and your employees, such as traveler’s insurance, rental car insurance, or protection from identity theft.
• Provides an emergency line of credit. Especially during this recession and financial crisis, it is more important than ever to have a line of credit open for any unexpected expense that might arise.

If you are a savvy entrepreneur, you can also be a savvy business credit card holder, and avoid negative consequences. Problems only arise from mismanagement and misuse, and wise business owners should pay off debt every month if possible to avoid paying interest. And while taking advantage of grace periods makes sense, especially during these times when cash is tight, it is important to always make payments on time, or you will face late fees, rate hikes, and credit damage. Caution should also be taken with cash advances. Consider avoiding them all together since they can cost you more in interest and fees.