Making it as a small business owner is tough enough without all the confusion caused by misleading credit card branding and the illogical application of the Credit CARD Act of 2009. However, despite being the backbone of our economy and being personally responsible for business credit card use, small business owners were largely excluded from the credit card bill of rights that characterizes the post-CARD Act credit card landscape.
So, what can you, as a small business owner, do to have the best chance of business success? What should you believe and what information must be disregarded?
To help answer these questions, let’s first consider some of the most prevalent myths concerning small business credit card use:
The Myths
Nowhere is it written that you must only use the products that credit cardpanies have branded as “business credit cards” for business spending. General-use consumer credit cards can actually be excellent tools for this type of transaction, particularly in light of the CARD Act. One of the most important protections given these cards (but not business credit cards) by the law is the rule prohibiting increased interest rates from being applied to existing debt unless an account is at least 60 days delinquent. Therefore, a personal credit card can actually give you much needed peace of mind and debt stability.
It’smonly believed that business credit cards protect small business owners from personal liability. However, according to a Small Business Credit Card Study by Card Hub, the only difference in liability between a general-use credit card and a business credit card is that a corporation is liable in addition to an individual for the misuse of a business card. Therefore, you are no more or less liable when using a general-use consumer credit card than you are when using a business credit card.
Myth 3: The credit card you get for business depends on yourpany’s credit standing.
While yourpany’s credit standing is somewhat relevant to a business credit card application, yours is much more important because credit cardpanies use individual financial information to determine eligibility for business credit cards. This shouldn’t be a surprise though because in addition to using personal financials in underwriting and holding individuals liable for card use, the Card Hub study revealed that nearly every major business credit card issuer reports usage information to the individual card holder’s personal credit reports.
The Strategies
Thebination of the new rules that characterize the small business spending landscape and the truth behind prominent business credit card myths leaves you with two possible payment strategies:
Using a personal credit card for purchases that will lead to an unpaid balance at the end of the month helps garner the debt stability necessary to make accurate budgets and optimize cash flow. Having a business credit card account for all other business transactions makes it easy to manage and track spending at the employee level. Therefore, when used inbination, a general-use consumer credit card and a business credit card provide a small business owner with the best of both worlds. Considering there is no liability disadvantage apanying personal credit card use, there is no reason to shy away from this approach.
Those small business owners who value the simplicity of using a single credit card for all business transactions can use a Bank of America business credit card. Displaying foresight and good customer service instincts, Bank of America is currently the only credit cardpany to apply the most important CARD Act protections to its business credit cards. Therefore, it can be used to make purchases that will be paid for in full by the end of the month as well as those that won’t be. The only downside to choosing this strategy over the previous one is that one card is unlikely to provide thebination of low interest and lucrative rewards that two cards can.
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