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Why Should You Apply for a Business Credit Card?

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Why Should You Apply for a Business Credit Card?

By Marco Carbajo, Guest Blogger
Published: July 7, 2011 Updated: March 2, 2012

Did you know that over 65% of all small businesses use credit cards on a regular basis but less than 50% of those cards are actually in the business name?

Are you putting your personal credit and personal assets at risk too?

Let’s review some of the most compelling reasons why you should apply for a business credit card for your company.

First, co-mingling personal resources like credit can jeopardize the protection of the corporate veil. If you believe you are fully protected because you are incorporated think again!

The alter ego theory happens to be the most litigated issue in corporate America today so why risk putting your personal assets at risk if you don’t have to?

With a business credit card used solely for company purchases and expenses you eliminate the risk of co-mingling personal resources.

Secondly, maintaining accurate records of your business purchases and expenses are critical in running a successful company. Not to mention it can save your bookkeeper a lot of time from separating your personal expenses from business expenses.

The majority of business credit cards provide detailed reporting that breaks down your expenses by category, so it's easy for you to budget, plan, and spot tax deductions.

Finally, establishing the creditworthiness of your company opens up much greater funding opportunities. This is especially important in reducing the reliance on your personal credit to qualify for business financing.

Many corporate credit card issuers report your company’s payment experience to a major business credit bureau. This not only helps your company build credit history but also prevents your business debts from appearing on your personal credit reports.

Now before you apply for a business credit card follow these seven key steps:

  1. Conduct a credit assessment- Be fully aware of where your credit stands on a personal and company level. Start by obtaining copies of your personal and business credit reports with scores. Remember, you are entitled to one free report per year with the major consumer credit agencies.
  2. Determine which type of business credit card you need- You should understand the primary functions of the card you are applying for including its limitations. Whether it’s a business debit card, prepaid business credit card, unsecured/secured corporate credit card, charge card, fleet card, or merchant card make sure you select the one that best fits the needs of your business.
  3. Read the fine print- Just because a card issuer offers all kinds of special perks and rewards doesn’t mean it’s necessarily the best card. Always read the fine print so you completely understand the terms and conditions and fees associated with the card.
  4. Look out for teaser rates and special offers– While offers like a no-interest promo are a heck of a deal to have the ability to borrow money interest-free most of them come with strings attached. Make sure you understand what conditions must be met and how long your teaser rate stays in effect.
  5. Apply for a business credit card that builds your company’s credit-To protect your personal credit you should apply for cards that report your payment experience to your company’s credit files.
  6. Avoid supplying a personal guarantee if possible– A small segment of card issuers will extend credit without a personal guarantee if your business has established strong credit ratings or has substantial revenues.
  7. Do not apply for too many cards- Be selective on which cards to apply for because excessive inquiries can raise a red flag with creditors as well as negatively impact your ratings.

On a final note it’s important to realize that even though business credit cards are not covered under the new CARD Act certain issuers are extending the CARD Act protections to its business credit card holders. This is just another factor to consider when applying for a card for your business.

Don’t make the mistake of putting your personal credit and assets at risk when it comes to running your business. Obtain a business credit card so you can start establishing a creditworthy company.

About the Author:

Marco Carbajo
Marco Carbajo

Guest Blogger

Marco Carbajo is a business credit expert, author, speaker, and founder of the Business Credit Insiders Circle. He is a business credit blogger for Dun and Bradstreet Credibility Corp, the Community, and All His articles and blog; Business Credit, have been featured in 'Fox Small Business','American Express Small Business', 'Business Week', 'The Washington Post', 'The New York Times', 'The San Francisco Tribune',‘Alltop’, and ‘Entrepreneur Connect’.


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thank you for the information..i don't use credit card yet for business, but this article make up my mind
Whenever opening a new company I wait about a year before I get some business credit. In the beginning it was very rough, but now I'm at the point where my other ventures can fund the new one. For others, you can do this in about 6 months. Be careful of what you're doing with your money so that the banks will give you a small credit line. USE THE CARD THEY GIVE YOU, but not a lot. Pay off the card and build your credit slowly. After about 6 months to a year, apply for a much much much larger line and I'm sure your bank won't mind giving it to you.
I always recommend clients pull an Experian credit report because you're able to update and refresh it everyday for no charge. All you need is the report #, SSN, and a couple more items to do so. Promo rates are great, if you utilize them properly. They're especially good for startups because startups typically won't generate revenue for a few months. However, never over leverage yourself and spend more than you can pay back.
thanks for this articles.This really helped me in building a small business in my blog
thanks for this articles.This really helped me in building a small business in my blog
thanks for this articles.This really helped me in building a small business in my blog
it will be more esealy if we get some credit in our pocket for transactional trip


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