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.