The Real Deal Behind Business Credit Cards
Written by James Chan   

So far, all the guidelines you’ve heard have been focusing on personal credit cards. However, you will also be using business credit cards regularly, whether as an employee on a business trip or a small business owner obtaining a loan. Business and personal credit cards are mostly similar, but there are a few differences to keep in mind when you’re swiping the card in your boss’s or your company’s name. Therefore, we have compiled some tips and tricks to effectively use a business credit card without getting into trouble.

Overview

Business credit cards, also known as corporate credit cards, are credit cards whose accounts are in the name of a company instead of a person. Then, individual credit cards using the same account can be issued to employees and officers of a company for purposes authorized by the company. Business credit cards generally offer higher credit limits as well as a low-or-no-interest introductory period, but at higher interest rates.


How Business Credit Cards Work

On the charging side, a business credit card works just like a personal credit card- swipe the card, and the purchase goes against the balance of the credit card. However, the balance is the company’s responsibility to pay off, along with the rest of its debt.

Warning! Just because the debt is in the company’s name doesn’t mean abusing your corporate credit card as an employee is a good idea. For one, purchases charged on your business credit card may still show up on your credit report, especially if repayments are more than 180 days delinquent. For another, companies often restrict the use of credit cards for their employees; you could be in really hot water if your employer discovers that you’ve been using the company’s credit card inappropriately. Lastly, some companies require you to pay the bill. Check with your HR department or whoever is responsible for managing the corporate credit cards for what can and cannot be charged onto a business credit card, as well as if you are required to pay all or part of it.


How to Get a Corporate Credit Card

If the company wants you to get a corporate credit card, it will tell you to apply for one yourself. Applying for a corporate credit card is just like applying for a personal credit card- you fill out the forms, the bank runs a credit check, and you either get approved or denied.

Be careful: some companies use this as a method to check your creditworthiness, and may rescind your job offer if you don’t get approved.

If you are an owner of a business, you can go on the website of any bank- and even some websites like Amazon- to apply for a business credit card. Each issuer of a business credit card has different rates, policies, and rewards programs, so shop around and compare. A simple Google search can bring up many comparisons of different business credit card deals. However, to get a business credit card, an applicant’s credit score has to be much higher than that required for personal credit cards.


Differences between Business and Personal Credit Cards

Personal Credit Cards
 Business Credit Cards
Lower credit limits
 Higher credit limits
Lower interest rates
Higher interest rates
Special introductory period Low/no interest introductory period
Paid Monthly Can be paid bi-monthly or even quarterly
Paid off by individual Paid off in the name of the company
Less stringent credit score requirements to obtain one More stringent credit score requirements to obtain one




Last Updated on Tuesday, 21 December 2010 06:25