Benefits of doing business with credit cards

• Credit cards are easy to get. They usually arrive in the mail. You can also find credit card deals in your mailbox. It is easier than getting any kind of financial loans.
• You can use the credit card reward points that you get to help flourish your business. You may use the credit card for all your business transactions. Every time you swipe your credit card at the billing booth you earn reward pints. Depending on the type of reward card that you use, you will be able to use the rewards for the benefit of your business. If you have a travel reward card than you can use the free travel tickets for your business trips. You may also get various reward points like free restaurants passes. You may pass this on to the employee of the month in your company and promote a well being and urge to work hard among your employees. You may also have the most popular means of reward credit card which is cash back credit card. You may use the extra cash to get more things for your business.
• The introductory offers for a credit card are usually very low and hence you can easily use it for business purpose.
• You can get a credit card for business even if you have a bad credit record. It is almost impossible for a person with bad credit record to secure a financial loan from the bank. Hence credit card is the last resort.

Knowing the actual cots of your credit card will enable you to transact more wisely; a few cards may charge up to 20% as their APR rate, and which means massive amounts of money. You must read the terms and conditions of the credit card company, before you enroll their services. At times the low introductory interest offer jumps to an extremely high interest rate in the next six months.

Avoid withdrawing cash from your credit card, as it carries a higher rate of interest than swiping it for paying food bills or other commercial purposes. It is better to lease your office supplies and equipments than swiping your business credit card, as you may have to end up paying a higher APR, because missing a single repayment due date means a massive hike in annual percentage rate.

Credit cards work well for small sized businesses that have strong and steady sales all round the year. But, that does not indicate that mid or big businesses should not take advantage of the business credit card. So, weigh the matter before selecting the best credit card.

A large part of the motivating factor is made clear by data that was released over the summer by Washington D.C.’s National Small Business Association which revealed that some 80% of small businesses in the United Sates rely upon credit cards to provide some portion of the necessary financing to run their company and nearly 42% of small-business owners carry outstanding credit card debt.

The Legal Distinction Between Business and Personal

However, if this debt is being carried on a business credit card account as opposed to a personal credit card account, it quite likely lacks consumer protections.

This is because the Credit Card Accountability Responsibility and Disclosure Act of 2009 which was enacted in order to protect consumers from any unfair business practices that may be exerted upon them by credit card companies. Because of this Act, issuers cannot raise the interest rate on a cardholder’s existing balances unless they are more than 60 days overdue with a payment. However, because small business credit cards were excluded from the CARD Act, lenders can change the rates on a whim for business lines of credit.

In fact, some critics accuse credit card issuers of having a keener-then-ever interest in having small business owners country-wide open up business lines of credit specifically because of the reduced consumer protections covering those cards in comparison to personal cards. While a few lenders have opted to apply most of the major provisions of the CARD Act to their small business credit cards as well, most have not.

Business Cards Have Advantages

Another benefit business credit card accounts afford issuers is the ability to, if the cardholder is paying two different rates on one card – for example one rate on purchases and another rate on a transferred balance – any portion of the monthly payment that exceeds the minimum  they are able to apply to the amount with the lowest interest rate first. This is in contrast the same two rate situation on a personal credit card account, where, under the CARD Act, the payment must be applied to the balance with the highest interest rate first in the interest of keeping costs low for the borrower.

The biggest incentive for small business owners to use credit cards as a means of financing their business endeavors is because credit cards are currently among the safer financing options available. Because credit cards are unsecured loans, the borrower does not have to put up collateral against what is borrowed as is required in the case of a small business bank loan. In those situations, borrowers often risk their business’s equipment or machinery or even the equity on their home in order to borrow money.

Use A Combination of Both

One option for small business owners is to use a personal credit card account as opposed to a business credit card account. That way, the account is protected under the CARD Act and will likely have a lower APR than an equivalent business card account. However, opening a business line of credit may avail the account holder of better rewards and added perks such as free online access to invoicing , cash management and budgeting tools.

Either way, the holder of a business credit card is personally liable for that debt.

Business credit cards are not covered under the Credit CARD Act of 2009 or the Truth in Lending Act, this means that business credit cards have not been regulated in the same manner that traditional credit cards have. This is important to note, because this means that the credit card issuers can increase charges on already existing balances, send bills at different times of the month, and shorten the time between bill payments, which are forbidden with unsecured credit cards.

Under the CARD Act, consumers with unsecured credit cards have a slight degree of protection from increases in rates. The act requires that credit card issuers give consumers 45 days notice prior to increasing their rate. And even when the rate increases, all extra charges will be applied to future balances, not the existing balance. While business credit cards are not required to comply with the CARD Act, a few of them do such as some offered by Bank of America and American Express. Read the fine print to know exactly how your business credit card handles rate increases.

Keeping this in mind, business credit cards do offer some perks. First, it becomes easier to separate personal expenses from business expenses, which is very helpful for entrepreneurs and bookkeeping. Also, these cards are more likely to offer accommodating payment options for business owners, in addition to spending tracking capabilities and larger lines of credit. There are also business rewards cards, which offer business-targeted rewards, such as points or cash-back on office supplies and cleaning equipment. Other cards offer special rewards in the form of accounting services and detailed billing.

Some business credit cards also come with introductory or promotional rates where interest is low or sometimes non-existent for a certain number of months, not to exceed 24 months. Be careful, because after these rates expire consumers may be subject to painfully high interest rates that could make running a business near impossible.

A business credit card is drastically different from a traditional unsecured credit card, but if you have a business there could be some benefits to owning one of these credit cards, as it could help finance your small business.