While small business credit card usage is on the rise according to the 2009 Small Business Credit Card Survey the majority of all small business owners fail to understand the importance of what’s in the fine print.
Statistics even show that over 65% off all small businesses use credit cards on a regular basis; but the problem is less than half of those credit cards are actually in the business name.
I hope to provide you with some insight into business credit cards and what you should pay close attention to when applying.
First, you should be aware that there are over 500 business credit cards available in the marketplace but less than 70 report your payment history to the business credit bureaus.
In addition, there are less than 40 business credit cards that will extend cash credit cards to your business without a personal guarantee.
Here are my ‘Top 4 Types of Business Credit Card Applications’ you should know about
The Business Credit Card Wannabe
This business credit card is by far the worst and in my opinion very misleading. It doesn’t matter how much fluff or creative sales copy is used by these particular companies what matters is what’ in the fine print! In a nutshell this business credit card application is nothing more than a glorified personal credit card.
How to identify?
The application requires your personal information, social security number, and business name only. No Tax ID# or Duns# is required.
Disadvantages
Personally liable for all debt
All charges and debts are reported on personal credit files
Impacts personal debt to credit limit ratios
The Business Credit Card Poser
This business credit card is doing its best to be a true business credit card but it doesn’t quite make the grade. In a nutshell this card still requires a personal guarantee but what makes it appealing is the payment history and credit card balance are solely reported to the businesses credit reports not personal.
How to identify?
The application requires your business information, Fed Tax ID#, Duns#, personal information and social security number.
Disadvantages
Personally liable for all debt if the business defaults
The True Business Credit Card
This is the real deal business credit card and what truly represents what every business owner should have. A card that is tied to the business and completely separate from personal credit. This card is the best of both worlds! The payment history and balances report solely on the business credit reports and there is no personal guarantee keeping the liability strictly tied to the business.
How to identify?
The application requires your business information, Fed Tax ID#, Duns#, personal information but no personal social security number. (No personal guarantee)
Disadvantages
NONE
*Keep in mind there are also business credit cards that allow you to apply with business information only and no personal credit check. However, if you’re business credit scores and files are not strong enough they may require a personal guarantee for approval. I call this the ‘Two Faced Business Credit Card’.
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To Your Success in Business and in Life!
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About the Author
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 SBA.gov Community, Business.com, About.com and All Business.com. His articles and blog; Business Credit Blogger.com, 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’.