Pros and Cons of Small Business Credit Cards

When used as intended, small business credit cards can be very beneficial for growing companies. However, you should also be aware that there are potential hazards around the corner, waiting for you to commit just a single mistake. Determine whether such a card is right for you by examining the pros and cons of these financial tools for business. 

Pros

There are a number of reasons why a credit card designed for small businesses is a must-have. Some are the following: 

1.       High Approval Rate – Consumer cards have stricter rules. Most of them require you to have at least good credit rating with sufficient income and established payment history. With a small business card, you do not have to have an excellent score just to qualify for a revolving credit line. The process is fast and simple, letting you borrow money easier than other traditional lines of credit. 

2.       Build Credit – If you don’t have good credit rating, now is the time to focus on building it using the plastic. You can watch your score go up as you continuously pay your bills on time. 

3.       Gain Rewards and Enjoy Exclusive Perks – Most cards today come with special rewards, including free airline travel, discounts, and free meals when you purchase supplies and equipment for your office. 

4.       Ease of Bookkeeping – Most small business cards offer a year-end summary to help owners keep track of their expenses, ultimately simplifying bookkeeping processes. 

5.       Convenience – Credit cards are known for being a very convenient tool. Your card can give you access to funds especially in times of emergency.

Cons 

Many people are wary of these types of cards and most of them have valid reasons. Here are the top three reasons why: 

1.       Interest Rates – These rates fluctuate time and again. Plus, many cardholders end up in debt because of the high interest rates. Once you delay your monthly payment, expect to see the interest grow rapidly. 

2.       Personal Legal Obligation – Most cards have personal liability arrangement where you secure the card in your name. By signing the agreement, you accept that any late or non-repayment would reflect in your credit report. 

3.       More Expensive – Although you have fast access to cash anytime you may need it, this accessibility comes with a price. Cash withdrawal through ATMs has high fees, and you have to watch out for the interest rate, late fees, and other penalty fees as well. These make the card more expensive than just using cash. In addition, most business cards require you to pay the annual fee, too.

Before you rush to apply for a small business credit card, remember to think things through carefully. Consider whether the advantages offset the downsides associated with the plastic.