Business Credit Card Updates and Tips

This is a guest post by Mr Credit Card from www.askmrcreditcard.com. Mr Credit Card reviews credit cards and today he is going to give us some tips that a business owner could take away with regards to credit card use. If you are looking to apply for a credit card, you should check out his best credit card deals and offers section on his website

Since the credit crisis began a year and a half ago, business owners and consumers have seen a huge credit crunch and a contraction in credit. Simply put, credit is not as available as it was before. On the consumer end, they are finding that credit card issuers are raising their interest rates and cutting their credit lines and in some cases even closing their accounts. Several business owners have also faced this issue. In this post, I would like to talk about some common misconceptions about business credit cards, the latest developments in the credit card area and some tips for business owners on how to manage your business credit cards.

First, let's start with some basic facts and misconceptions.

Small Business Credit Cards require personal guarantee - There is a misconception among many people that having a "business credit card" is like having a non-recourse loan. Nothing could be further from the truth. When you actually apply for a small business credit card (which most credit card issuers have), you are required to fill in your social security number. If you do not have an EIN number, you are simply treated as a sole proprietor. The credit line that is given to you will still depend on your personal credit score.

Some business credit cards may not report to personal credit bureaus - Even if you put your personal guarantee behind the credit card, most business credit cards do not report your payment to your personal credit bureaus. Most instead report to Dun and Bradstreet and/or Experian Business. But if you are ever late beyond 60 days, or late for consecutive payments, they will report it to your personal credit bureaus and your personal credit score will take a hit.

Recent Developments

There are recent developments in the credit card area that all business owners should be aware of. And I want to highlight them here.

Credit Card Issuers are reducing credit lines - make sure you have other sources of working capital - Due to the credit crisis, many banks have taken huge hits in their loan portfolios and default rates in their credit card portfolio have risen as well. I have had many readers who have seen their credit card lines slashed by as much as seventy percent. If your business requires working capital, do not just rely on a credit card's line of credit. Make the effort to establish a business credit history. Go to your local bank and get a working capital line of credit. Secure a couple of them even if the interest rates are higher. The whole point is to diversify your funding sources so that if one dries up, you are not left hanging in the air and your business will still continue.

Credit Cards have stopped offering balance transfer deals for business credit cards - Once again, the credit crisis has made credit card issuers much more conservative in the rewards that they special teasers that they offer. Pre credit crisis days, credit cards scrambled to offer teaser 0% APR balance transfer credit cards. Their goal was to acquire customers from other banks. But they have since stopped offering these deals in their business credit cards. This is important to know because if your interest rates have been raised by your business card issuer, the only way to get a 0% deal is to a credit card balance transfer to a regular consumer card instead.

Credit Cards rewards have declined - Prior to the credit crisis, credit card issuers gave very good rewards. But they have slowly scaled by their rewards. Nowhere is this clearer than in the gas rewards area. In the past, issuers were generous and offered 5% rebates. But many business owners used these cards solely for their fleets and made them unprofitable for the credit card issuers. Hence, they have slowly reduced these rewards and most have now put a cap on the amount of rebates you can earn with gas expenses charged to the card.

Some Tips to Maximize Your Use of Business Credit Cards

Set your billing cycle to suit your business - Most credit card issuers will allow you to do set your billing cycle date. You should make a conscious effort to set it up such that it matches your cash flow.

Cap the credit limit for your employees - If you have employees and issue them with credit cards, make sure you set a credit limit on their cards. Make sure you do not forget to do this.

Make use of reward cards - Because credit cards offer rewards, you would be a fool just to get a vanilla business Visa or MasterCard. Instead, you could consider getting credit cards with rewards. For example, cash back business credit cards will help you save money for your business. You could also choose to get a credit cards that gives you rewards so you can get things like free airline tickets for your business travel or personal vacation.

Check your personal credit report periodically - Because your personal credit still ultimately determines your rates and credit limits, it is prudent to check your credit reports once in a while. You can get a free copy of each credit card report from the three credit bureaus (Experian, TransUnion and Equifax) from www.annualcreditreport.com. Check them for errors and if you find them, make sure they get corrected.

Make sure you have a Visa or MasterCard - Some business owners are big fans of certain companies like Amex or Discover. I happen to also be a big fan of American Express as well. But you should also diversify and have a Visa or a MasterCard because some vendors simply do not accept Amex or Discover.

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