The Positive and Negative Side of a Credit Cards for Business

If you are a small business owner, perhaps you may be considering the possibility of using a business credit card to finance your company. Some entrepreneurs may recommend business credit cards while others may say that it's completely unnecessary. So, how would you know whether or not it's suitable for your own business?

In this post, we present the pros and cons of using credit cards for business to give you a better insight on the issue.

The Pros Of Business Credit Cards

Ease of application. Undoubtedly, it is much easier to apply for a business credit card than to acquire a loan. Application can be done online and approval usually takes just a few minutes. The criteria of eligibility are not as strict as compared to business loans. In fact, you can instantly get approved even if you are a new or start-up business if you have impressive personal credit history. On the other hand, if you have poor credit, a secured business credit card is always an option.

Easy payment options. Carrying a business credit card and using it to pay purchase is a lot more convenient than carrying cash or issuing checks. A business credit card can used for both online and offline transactions and many vendors today do accept credit card payments.

Financial back-up. Having a business credit card can be a life saver especially when unexpected expenses arise and there's not enough cash on hand. Credit card charges can be paid at a later time so business owners can buy some time to earn money.

Online banking. There is no denying that online banking is a trend in the industry today and a business credit gives you that option to send payment online, fast and easy. Just imagine not having to leave your office or visit the bank just to make payments.

Bookkeeping made easy. Issuers of business credit cards also provide a yearly report or account summary so you can review all transactions you've made for the entire year. This provision is indispensible especially when preparing your business taxes or doing your yearly inventory.

Build business credit. Last but certainly not least, business credit cards are great tools for building business credit history, especially if you have yet to get approved for a loan.

The Cons of Business Credit Card

High interest rates. Because credit cards have high interest rates, it's crucial to pay down balances in full and on time. The National Small Business Administration reveals that about 71% of business credit card owners do carry a monthly balance. Of course, this could pose a serious threat to the business.

Liability clause. The liability clause is a personal guarantee of the account holder that he/she is personally accountable for paying all debts incurred using the business credit card.

Security risks. Business credit cards do not offer the same protection as personal credit cards provide particularly with regards to liabilities. For example, a business owner cannot simply dispute unauthorized charges in the account.

Overspending. When left unchecked, business credit card spending can go out of control and can lead to bad debt. Business credit cardholders need to be very cautious about how they use their credit lines in financing their business.