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Do You Really Need a Business Credit Card?

Small Business | SouthEast Bank | September 22, 2021

As a small business owner, one of your top priorities is to obtain capital for your business. While there are many ways to do that, a business credit card can be integral to your business's everyday needs and also help you establish a business credit history for when you're ready for major financing options. 

While you may be able to generate some credit for your business using a personal card, there are several reasons to consider getting a business credit card instead.

 

The Difference Between Personal and Business Credit Cards

One of the most important things you can do as a business owner is separate your personal expenses from your business expenses. You can, of course, do that with any combination of credit and debit cards, but here's why you should consider a small business credit card.

 

Higher Credit Limits

Small business credit cards tend to have higher credit limits than personal credit cards. This is because businesses tend to spend more than the average household. 

Because business credit cards don't require you to pay immediately — the charges to your card aren't typically due until a few weeks after your statement closes — you can use your spending power to better manage your cash flow. Be sure you’re making payments by the due date, however, to avoid damaging your credit score.

 

Builds Business Credit

Most small business credit card issuers report your account activity to the commercial credit bureaus, which is crucial for establishing your business credit history.

When you're just starting out, it can be difficult to qualify for affordable financing. Small businesses have a high failure rate in the first few years, so most of the best business financing options are reserved for companies that have been around for two or three years and have a strong financial track record and credit history.

The good news is that as long as your personal credit is in good shape, your odds of getting a business credit card when your business is brand new are relatively good. Business card issuers typically require a personal guarantee when you apply, which means you're personally liable for paying off your balance if your business can't. 

And as long as you use the card responsibly and pay on time every month, that positive history can set you up for easier access to financing when you need it.

Choosing a reliable partner can also be a great way to stay in top financial shape. SouthEast Bank offers a variety of business credit card options, as well as a knowledgeable team that can support you in choosing the right one for your business.

 

Business-Specific Rewards and Perks

Your business likely has a much different spending profile compared to your household. While many personal rewards credit cards offer bonus cash back, points or miles on things like groceries, gas and dining, a business rewards credit card may offer you extra rewards on shipping, advertising and office supplies.

Of course, not all businesses are created equal, so you'll want to consider the cards that best fit your spending profile. For example, the SouthEast Bank Business Cash Card1,2 offers 3% back eligible net purchases from office supply stores and phone, internet and cable TV services, 2% back at restaurants and gas stations and 1% back on everything else.

But if you don't spend a lot on office supplies and utilities, you may opt for the SouthEast Bank Business Real Rewards Card,1,3 which offers a flat 1.5% cash back on everything.

SouthEast Bank also offers free access to the CardValet app, which allows you to monitor transactions from multiple business credit cards within a simple, secure app.

 

Fewer Consumer Protections

The Credit CARD Act of 2009 created several protections for consumers, including how and when card issuers can raise interest rates, how they can market their products and more. Unfortunately, those protections do not extend to business credit cards.

Fortunately, many top credit card companies have voluntarily offered the same protections — or at least similar ones — to their business credit card customers. But make sure you read the fine print of any credit card you're considering before you submit an application.

 

The Bottom Line

When it comes to getting enough spending power, building your business credit history and getting the right rewards and benefits, a business credit card can provide a lot more value to small business owners than any personal credit card can. 

And while consumer protections aren’t always as robust, you'll generally still get many of the same protections that you get on your personal credit cards. What's more, if you use your card responsibly, you shouldn’t have to worry about running into any issues with your credit card company.

Before you apply, though, it's important to check your credit to get an idea of where you stand. Some of the best small business credit cards require good or excellent credit, which means having a FICO credit score of 670 or higher. You can check your FICO score for free using a credit monitoring service like Experian or Discover Credit Scorecard.

You'll also want to take your time to shop around and compare multiple business credit cards to make sure you find the right fit for your company.

 


1The Elan Rewards Program is subject to change. Rewards are earned on eligible net purchases. Net purchases are purchases minus credits and returns. Not all transactions are eligible to earn rewards, such as Advances, Balance Transfers and Convenience Checks. Upon approval, see your Cardmember Agreement for details. You may not redeem Points, and you will immediately lose all of your Points, if your Account is closed to future transactions (including, but not limited to, due to Program misuse, failure to pay, bankruptcy, or death).
 
 2Cash Rewards: "Cash Back Rewards" are the rewards you earn under the program. Cash Back Rewards are tracked as points and each point earned is equal to $0.01 when redeemed. You may simply see "Cash Back" in marketing materials when referring to the rewards you earn. Merchants are assigned codes based on what they primarily sell. Elan Financial Services cannot control how merchants choose to classify their business and reserves the right to determine which purchases qualify. A purchase will not earn additional points if the merchant's code is not eligible. You will earn 1 Reward Point ("Point") for each dollar of eligible Net Purchases charged to your Account during each billing cycle. You will earn additional Points as follows for each dollar of Net Purchases charged to your Account during each billing cycle at merchant locations that are classified as automated fuel dispensers and service stations or restaurants (1 additional Point); and office supply stores or cellular phone, landline, internet and cable TV services (2 additional Points). Office furniture stores, direct marketing services and printing services may not qualify as office supply stores. The number of additional Points earned on office supply store purchases, cellular phone, landline, internet and cable TV services, automated fuel dispensers, and service stations or restaurants is unlimited. Points expire five years from the end of the quarter in which they are earned.

 3Real Rewards: You will earn 1.5 Reward Points ("Points") for each dollar of eligible Net Purchases made with your Account within a billing cycle (equal to 1.5% cash back). Monthly net purchase points will be applied each billing cycle. Points expire five years from the end of the quarter in which they are earned.

Note: Links to other websites or references to services or applications are provided as a convenience only. A link does not imply SouthEast Bank’s sponsorship or approval of any other site, service or application. SouthEast Bank does not control the content of these sites, services or applications.

Information contained in this blog is for educational and informational purposes only. Nothing contained in this blog should be construed as legal or tax advice. An attorney or tax advisor should be consulted for advice on specific issues.

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