Do you need a business credit card?
If you are a small business owner, you have probably asked yourself this question. And the answer obviously depends on your line of work and the nature of your business. For me, the answer is yes.
Sure, I know some of you are saying, “does anyone really need a credit card?” Well, yeah, some people do. Especially small business owners. There are many situations where you need a credit card to make purchases (especially online), secure travel or rental cars, and more. Not every business owner needs a credit card, but many do.
Why I Use a Business Credit Card
I run several websites and most of the business I do revolves around online transactions. I usually only have a few payment options for online transactions: Credit card (accepted almost everywhere), debit card (accepted almost everywhere), business check/ACH (not accepted everywhere), and PayPal (not accepted everywhere).
Why credit cards trump other payments options. Credit cards offer better buyer protections, especially when it comes to fraud or payment disputes. Credit cards also offer better cash back and rewards programs than debit cards and most business cards offer additional cash back or rewards in categories businesses are most likely to use, including gas stations, office supply stores, or other categories. So while I could use my debit card that is linked to my small business savings account (I have two accounts, one with Chase Business Checking, and a Capital One Spark Business Savings account), I choose to use a business rewards credit card instead. The extra cash back is nice and I pay the card in full each month.
Did you know anyone can apply for a business credit card? You don’t need a small business to apply for a business credit card – anyone can apply for a business credit card by using their SSN when they apply. Why would you want to? Because business credit cards often offer different rewards programs or higher limits than some traditional rewards credit cards.
Benefits of Business Credit Cards
There are several benefits to using a business credit card, some of which are extremely important, and some of which fall into the “nice to have, but not 100% necessary” category. But if you plan on using a business credit card anyway, then the “nice to haves” are really nice to have!
Separation of business and personal finances. Probably the most important benefit is being able to easily separate your personal and business finances. This is very important to me as I separate my personal and business finances. (More about how I manage my small business finances). I only make business purchases with my business credit card, PayPal, or with business checks. If I use my business credit card (which I use as often as possible), I pay it in full each month.
Better consumer protections. I’ve had my debit card number stolen before in data breaches or hacks. Thankfully, the thieves weren’t able to fully deplete my checking account before it was caught. But I know people who have had their entire checking and linked savings accounts drained by thieves. This is expensive and time consuming to unravel. You generally won’t be on the hook for more than $50 if you report the incident right away. But your money can be tied up for days and weeks, which can cause huge problems for your business. Credit cards, on the other hand, aren’t connected to your bank account, making it easier to continue your business operations in the event of a data breach or theft. That reason alone makes credit cards preferable in my book!
Higher spending limits. Many business credit cards offer higher limits than personal credit cards. This is important for startups or businesses that have large monthly expenses. Not all vendors accept money transfers, PayPal or other payment methods, and sometimes that extra float each month is necessary to keep operations running smoothly. Of course, don’t abuse the spending limits. Use your credit cards as tools, not as a means to overspend.
Higher rewards for business expenses. Most business credit cards offer higher cash or points rewards for common business expenses such as office supplies, gas, restaurants, travel, and sometimes rotating categories. If you are planning on using a business credit card anyway, you may as well use a rewards credit card and reap the benefits!
Automatic payments. It’s easy to set up automatic payments to your business credit card, which is nice for recurring bills. Some, but not all companies will do this for checking accounts. As I mentioned above, I’m all about the cash rewards, and recurring payments are a nice way to do that!
Flexibility. Obviously the best way to manage your credit card bill is to pay it in full each month, but things don’t always work out that way, especially when working for a startup or in the beginning stages of many small businesses. I recommend avoiding carrying a balance on your credit card if at all possible. But sometimes you need to get your business off the ground. Do so responsibly, and know that you can carry a balance for a short time if it means making payroll or otherwise sustaining the early stages of your business.
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