To many, credit cards are the most convenient pieces of plastic that makes life so much easier. For others, they can be a hassle, especially for those who use their own credit cards to support their business. Running a business comes with numerous challenges, among them includes the securement of financing for business operations. One of the most important assets that a business can possess is good credit and for good reasons. Good credit opens the door for businesses seeking financing and could help owners receive favorable terms from vendors and suppliers.

One of the ways business owners could do this is by having a credit card specifically a business credit card. Business credit cards can offer benefits such as easy access to a revolving line of credit when used correctly. While useful, it’s important to note that having a business credit card also comes with its own disadvantages as well. To better understand their strengths and weakness, here are a few things business owners should know about business credit cards.


Financial perks: Business credit cards can help businesses acquire the funding they need during tough times. When business is slow and lenders are out of reach, businesses can still use the card for emergency purchases. This comes in handy when you need to pay suppliers or when your business’s accounts receivable falls behind. It’s best that owners seek credit cards that can offer them interest-free financing for a certain period of time. The SimpleCash card from American Express is one example of a card that offers 0% APR on purchases for the first 15 months.

No collateral: When you apply for an unsecured business credit card, collateral is not needed so your business assets stay protected. If you suddenly stopped making payments, for example, lenders wouldn’t be able to take any possession like inventory or property. Most business credit cards are unsecured and come with a wide range of benefits. Among them includes short-term cash flow and the separation of personal and business credit. A secured business credit card, however, requires applicants to provide a deposit in order to secure a credit line. The owner can receive their deposit if they decide to close their account.

Rewards: There are many business credit cards that offer rewards such as cash back on purchases. This type of reward allows owners to receive a small percentage of what they’ve spent as repayment. Other offers include sign-up bonuses, discounts on air-travel miles and points that can be redeemed for other rewards. When it comes to business credit cards, there are many perks that owners could take advantage of.


Require personal guarantee: While collateral isn’t needed, some issuers may require users to sign personal guarantees as a precaution. This makes business owners personally liable for any unpaid debt they owe. Like regular credit cards, not paying your business credit card on time could affect your credit rating. It could also prevent you from borrowing money from lenders which could hold your business back financially. Creditworthiness is something you should be concerned about whether your a business owner or not.

More expensive: While convenient, business credit cards tend to have higher interest rates than business loans and fixed line of credit. On top of this, business owners can incur fees such as late payment and cash advance fees if they miss a payment. Interest payments could also fluctuate based on the prime interest rate and how owners manage their accounts. For this reason, business owners must always be careful and read the terms and conditions on a credit card.

Less protection: Business credit cards typically comes with less protection than personal credit cards. This makes it difficult for owners to correct billing errors, return purchased items or reverse fraudulent transactions. Personal credit cards, though, are given fee caps to avoid being overcharged and receive protection from instant interest rate hikes without notice. While business cards don’t receive those same benefits, many card issuers do give the option of extending the same protection found in personal cards to business cards. This, however, 

Business credit cards can be a very valuable tool business owners could use to build credit. However, deciding if having one is right for your business could be a difficult choice to make if you don’t understand how they work. By being careful about how they use it, owners can avoid some of the pitfalls that can come with having a credit card to support their business. This would ensure that they reap all the rewards that come with it while securing financing for their business in the future.