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Updated by 07.20.2023
Business Credit Cards Yield Big Benefits
If you’re like many small business owners, you may be thinking about obtaining a business credit card, but also wondering whether you should really do so. The answer is “yes” because having such a card offers small businesses a wealth of benefits. Here are a few to start.
Ability to Build Business Credit History
Having a recent business credit history built with a business credit card, of course, decreases the likelihood of being turned down for a business loan. It also increases the odds of dodging high-interest rates and other less attractive terms should your business loan be approved.
Easier Separation of Business and Personal Expenses
Treating business and personal finances as two separate “entities” is a must for those whose companies operate as a corporation or LLCs. Mixing business and personal expenses may cause you to lose the limitation of personal liability that corporate or LLC designation is intended to provide.
Fewer Tax Preparation Hassles
Preparing for tax season is difficult enough without worrying about separating your personal expenses from your business expenses. Besides, only business-related expenses are deductible for a business return or on any Schedule C you file. With a business credit card in hand, business expenses are automatically separate from personal expenses no head-scratching over which receipts belong in which stack of papers.
Increased Spending Flexibility
Using your personal credit card to grow your business isn’t the best idea, as it may tie up so much of your own credit line that you’re unable to cover personal purchases and emergencies. Having a separate business credit card with its own credit limit offers additional credit flexibility.
What’s more, a business credit card offers flexibility in the form of access to other financial products that can be used to expand your business. Examples include a higher credit line than would be possible with a business credit card alone.
Increased Control Over Employee Spending
Controlling employee spending is less of a headache when you extend business credit card privileges to staff who need them rather than reimburse employees for these expenses. Many business credit card issuers allow business owners to set and adjust individual spending limits, as well as to receive individual spending alerts. Bonus: Employee cards speed up the process of earning rewards (see below) for business credit card account usage.
Cash back, travel, and gift card entities that issue business credit cards offer as many rewards to cardholders in return for utilizing the products as those that issue personal credit cards. Some of these rewards can be “put back” into the business, for example, to make purchases for the office or to pay for business travel.
In truth, procuring a business credit card is as important as accepting credit card payments. The sooner you take this step, the bigger the benefits for your operation.
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