Business Credit Cards Explained
When you consider getting a business credit card, it’s important to know what you need to qualify. In this article, we’ll outline the different types of business credit cards available and what each one offers. We’ll also explain how to decide which option is best for your business and what to watch for when you apply for a card.
A business credit card is similar to the personal credit card you keep in your wallet, and the difference is that it’s intended for use by a business and can help build a company’s credit profile for future borrowing. Business credit cards come with expense monitoring and other tools meant to help manage small business spending. And because businesses typically spend more than individuals, business credit cards usually offer more value in perks and rewards.
What Is a Business Credit Card?
As mentioned above, business credit can be used by all businesses, big companies, or start-ups. This way, a business can build up its credit score in the future. A business credit card is basically a revolving credit line a business owner can use, repay, and use again at any time. A business credit card may be a convenient option for purchasing inventory and supplies, paying bills, or covering travel expenses, especially for small businesses.
How Does a Business Credit Card Work?
A business credit card is a plastic card that businesses can use to borrow money. When a business uses credit cards, the credit card company pays the business back with interest. A business may also be able to get discounts on purchases with a credit card.
When applying for a business credit card, a business should first consider its needs first. A business should decide what is best for it, either a short-term loan or a long-term loan. A short-term loan would last between one and three months, while a long-term loan would last between six and twelve months. A business should also decide how much money it wants to borrow and what interest rate it wants to pay.
After deciding what kind of loan it needs and how much money it wants to borrow, the next step is to find a credit card company that will work with the business. There are several different types of credit cards for businesses, so the business should choose the type that best suits its needs.
Business Credit Cards: Pros and Cons
Business credit cards are a great way to get approved for a loan, but they come with their own set of pros and cons. Here’s what you need to know about them:
Pros of business credit cards:
- They’re often the quickest way to get approved for a loan
- It can help you build your credit history
- If you have excellent credit, you may be able to get a card with no credit check at all
- Possibility to pay in installments
Cons of business credit cards:
- Can reduce your future income
- Terms and conditions can be confusing
- High-interest rates
- Expensive fees
- You can end up in debt
Pros
Why a lot of businesses go for a business credit card is because when they need money fast, this is a great way to get it. On top of that, if you are staying on top of your monthly payments, it can boost your credit score. Also, you can get business credit cards in installments.
Cons
It might attract you that you can get money fast and easy with business credit cards, but don’t forget that they have high-interest rates. If you miss your monthly payment, you will have to pay fees that are not cheap. And on top of it all, you can end up in debt if you are not careful with spending.
Who Can Get a Business Credit Card?
If you own a business and want to take advantage of the many benefits that come with having a credit card, you may be wondering who can get one. Generally, businesses can apply for a credit card through their bank or credit union. However, there are some important things to keep in mind before applying.
First and foremost, your business must have a valid checking account. This is because most banks require businesses to have a valid checking account in order to apply for a credit card. Second, your business must have a good credit history. In other words, this means that your past credit card payments have been made on time and in full. Third, your business must have an established customer base. Your customers must have placed at least one purchase with you in the past 12 months. Fourth, you must have sufficient funds available in your bank account to cover the costs of any new credit card bills that come in as a result of applying for a business credit card. Finally, your business should compare different business credit cards before applying so that you can find the best option for you and your company.
What to Consider When Getting Business Credit Cards?
When it comes to business credit cards, you have a lot of choices to consider. But before you pull out your card wallet, there are a few things you need to know.
First, let’s take a look at the different types of business credit cards. There are two main types: credit cards and debit cards. Credit cards give businesses access to revolving credit lines that can be used for expenses such as buying inventory or paying employees. Debit cards allow businesses to withdraw cash or make purchases using funds already deposited in the account.
The next question is, which type of card is best for your business? This is a decision that depends on your specific needs and budget. If you’re just starting out and don’t have a lot of credit history, a credit card might be the best option because it will give you access to more money quickly. However, if you’ve been approved for other loans and want to keep your borrowing limits low, a debit card might be better suited for you.
When Does a Business Credit Card Make Sense?
If you want to get a business credit card because you’re incorporated, have employees that occasionally need a business card, or otherwise see the need to improve how you track business expenses that would be paid by credit card, then it makes perfect sense for you to get one. Or you just need some extra cash for your business to buy equipment, or just until you get that big payment from a client, business credit cards can work wonders for you.
On the other side, if your business is small or you just started, and you are unsure if you have a large amount of money flowing in any time soon, you might want to consider a different option. Remember that if you are unable to repay the loan back, you can damage your credit score and end up in debt.
Final Thoughts
Many businesses need money from time to time, no matter whether them being big or small. That’s why they turn to business credit cards. Not many people understand the potential risks they can bring if you default on it.
Since you want your business to be successful and grow, we made this article so you can learn more about this type of loan and choose the best fit for you. We also recommend consulting with a financial advisor before making a decision.
