There are some differences between business and personal credit. The first thing to understand is that business credit is separate from your own credit and the way that you pay your bills. One important distinction is that business credit cards carry with them different interest rates than do your personal ones. It is also important to understand that many business credit cards now carry with them extras such as travel insurance, which can be a money saver in the long run. So, what are the differences between business credit cards and personal ones?
The biggest difference between business credit cards and personal ones is that the business card is usually associated with a company. The line of credit that accompanies it is not available to you personally. As such the interest rate on your business credit card is based on the rates that the company is willing to give. This means that your personal interest rates will likely be higher than they might be on a home card. You should shop around to find out what the average interest rate on business credit cards is.
Another difference between a business credit card and your personal one is that your business credit card carries with it a set limit. This is the maximum amount that you can charge to your business credit card account. While your personal limit might be higher, it is rarely ever as high as the business credit card company's maximum. You should keep this limit in mind when you are comparing business credit cards.
Credit cards often offer rewards or incentives for making purchases. Many business credit cards will include air miles with your purchases. Some will provide you with free hotel stays if you are a loyal customer. These rewards are usually only available to customers who have good credit scores. However, it is still worth considering whether these rewards would be valuable to you.
Businesses often use the card to pay suppliers. If you are a small business with many employees, then you will need to arrange a payment schedule with your supplier(s). Since most suppliers are paid by the credit card company, you could benefit greatly from a business credit card. In addition, you will be able to control when payments are made since the business credit card company will receive your payments for you. As with personal credit, the interest rate for business payments can be quite high.
If you are a sole proprietor, a business credit card offers you the opportunity to build up credit status. The credit card company will report your activities to the credit reporting agencies. This can help you to establish new credit lines, obtain loans at better rates, or even get new business accounts. However, it can also hurt you should you not keep up with payments.
One reason that a business credit card is different from personal credit is that the business . . . . . . card is often secured with collateral. This means that should you fail to make payments on time, you may be held liable for legal action against the business. An unsecured credit card is often a requirement for startup companies, especially if they are considered small. However, it is usually not a requirement for established businesses. If your business is growing to the point that it requires a higher level of credit card transactions, then an unsecured credit card may be a good choice.
As with any loan, business credit cards come with varying terms and conditions. Be sure to read all fine print. Make sure you understand all fees, late fees, penalties, and other conditions associated with the business credit card. Always keep excellent payment records. Maintain steady cash flow at all times. These are just some of the ways that business credit cards can help you succeed.