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How to Deal with a Business Credit Card?

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It’s often not simple to decide whether you should use a business or a personal credit card. Both have advantages and disadvantages, and, as with all cards, there are always people who tend to treat them like quick no credit check loans which have to be repaid sometimes in a very, very distant future – so any expense can be charged today, without worries. Obviously, this is not the case, and making a wrong decision will have severe consequences.

Business Credit Cards for Employees

Some companies ask their employees to open a business credit card for business-related expenses – particularly when the jobs require a lot of traveling. This should be a straightforward case, as the employee should use the card only for expenses incurred on the job, and the company should pay everything, making sure that no balance is carried over at the end of the month.

Unfortunately, things are not always perfect. When you apply for such a card, it will be put in your name, so the lender will check your credit score, and establish the interest rates accordingly. If the employer fails to make a payment on time, this will go on your record. To make things even worse, many such business credit cards are not reported to the credit bureaus, so they will not help your credit score – but they will cause significant damage if somebody in accounting makes a mistake and the card defaults.

If you are not satisfied with the employer’s policies, you may want to avoid the business card. Offer to use your personal card instead, and to bring proof of all expenses separately. Alternatively, you can take the business card, but keep an eye on the debt accumulating on it, making sure it remains within reasonable limits – so that you can pay it off in case of an emergency, and ask the company for a reimbursement later.

Business Credit Cards for Small Business Owners

For small business owners, a business credit card is a great tool to help insure that personal and business expenses do not mix. However, if you’ve agreed to personal liability when you applied for the card, any case of late payment will go on your personal credit report. This is almost always the case for start-ups, as lenders are quite reluctant to provide a card without personal liability when the company is new and does not have any credit history.

In addition, business credit cards follow different rules than personal ones. The most important difference is that the lender does not have to give you an advance notice when fees change, or a 21-days grace period, so you may end up with a more expensive card than initially anticipated.

Business cards also have higher limits – for example, if you’d qualify for a limit of $500 on a personal card, you can hope to obtain $5,000 on the business card. Of course, this also means that there’s a high risk of piling up debt without even noticing, particularly when the business is new, and you don’t know exactly how to budget your expenses. It’s very easy to max out all the cards, take a few personal loans, switch to payday loans and other no credit check loans when you can’t make ends meet, and end up close to bankruptcy before you even know it.

4 Reasons Why Credit Card Reward Programs are Not Worth It

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Credit card companies have to be more creative in convincing consumers to spend using their plastic cards. Aside from the many promos and freebies offered, many credit cards now come with reward programs. Not surprisingly, those rewards effectively persuade many people to sign up and use plastic cards.

Always remember that credit cards are still a form of a loan. You will enjoy the benefits and convenience of cashless purchase transactions. But you will have to bear the interest charges and other fees that come with it. Those charges comprise the revenues of credit card firms. If you will review the high annual profits of those companies, you will be surprised at how they make money from consumer spending.

Reward programs of credit card products are intended to further boost consumer spending using plastic cards. Those programs are heavily marketed and advertised. Are you interested about the airline miles rewards, gift certificates, and other freebies that are offered by those reward systems? Before you sign up and obtain any of those reward cards, sit back and think it over.

Here are four reasons why you should not consider getting one.

  • Credit card reward programs are meant to encourage consumers to spend more often using their plastic cards. That is because reward points are earned only after spending using the card. In many cases, credit card owners become more motivated to spend, setting aside any concern about high interest rates and greater accumulated purchases. They usually end up getting more debt due to overspending.
  • Credit cards with reward system often come with higher interest rates and additional charges. You should notice this fact. These cards are often marketed highlighting the possible perks and rewards, notwithstanding the possible costs that can be incurred. Sometimes, the total of all the excess charges and interest rates in a given period can be equal or even more than the amount of the reward provided. This is the reason it is more advisable to just save money to spend for the expenses covered by credit card reward programs.
  • Reward credit cards usually come with higher standards specifically for credit scoring. Many consumers’ credit card applications are rejected due to this. It should be noted that such cards are often offered and provided to people who have greater income and who have better credit scores. You might be wondering what harm credit card application rejection can cause you. For one, it can surely pose a negative impact on your credit rating.
  • Many cards with rewards come with attractive introductory offers. Most of the consumers are misled to thinking that those will last for some time. But usually, those special offers just last a month or two. By the time the offer has lapsed, the cards can get more expensive and less useful. There are many other pitfalls that are looming along with the use of reward credit cards. That is why many experts advise consumers against getting into the fad to obtain and use those plastic cards.

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