By the time you read the words "business credit card laws," you might very well be half asleep and no one would blame you. The thing is, small business owners need to know what's going on in the credit card world if they want to maximize profits and ultimately avoid going belly up.
In the Past
You see, small business credit cards are essentially living in the past. Because they aren't covered by the personal finance law passed in 2009 to reform the system, they're still subject to the same crooked tactics made commonplace by banks prior to the recession. That includes double-cycle billing, payment allocation designed to cost you the maximum amount of money, and most importantly, arbitrary interest rate changes for existing balances.
That last part makes small business credit cards very unreliable funding vehicles, as they cost you the debt stability required to confidently allocate funds. How are you supposed to operate when you could wake up one day to drastically higher costs thanks to a bank executive raising interest rates in order to earn a bonus?
It's therefore fair to wonder where you're supposed to turn, considering that you neither want to sacrifice debt stability by using a small business credit card nor protection from personal liability by using a general-consumer credit card.
This is where things get particularly interesting. A lot of folks believe that business credit cards insulate their personal finances from the economic vagaries of running a small business, but that's merely a common falsehood.
All of the major credit card issuers hold small business owners personally liable for debt. It makes sense when you think about it, since they pull your personal credit card reports when making approval decisions and require that you list your Social Security Number on applications.
There is indeed an effective solution to your plastic predicament. Since a general-consumer credit card won't increase your personal liability any more than a business card but will confer CARD Act protections upon you, you should use one for funding purposes. Not only will this afford you debt stability, if you can score one of the 0% offers currently on the market, you'll also be able to avoid interest for a year (or more) and therefore save a lot of money (read the fine print on these deals as you could be hit with higher interest once the interest-free period ends).
But what about rewards? Well, since small business credit cards offer unparalleled business-oriented rewards, help you track company spending, and give you the power to set spending limits for employee authorized users, you should use one to facilitate everyday expenses. Debt stability won't be an issue because you should always pay for such purchases in full each billing period.
Using two cards, specifically targeted to different types of transactions, will enable you to cobble together a far better collection of terms than you'd ever be able to find on a single card.
The Bottom Line
Ultimately, heeding this advice will make the road to small business success somewhat less bumpy. It won't automatically turn your company into a force to be reckoned with, but it will help you save hundreds of dollars and attain a clearer perspective on your company's operations. I don't have to tell you how much that's worth to a budding small business, especially in today's economy.
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