Did you just apply for a business credit card? Nice work! You’ve taken an important step in your career as an entrepreneur.
But if you’ve never used business plastic before, you’re entering new and unknown territory. Take a look at the details below for five things you should know about your new card.
1. You’re now in a good position to keep business and personal expenses separate
As your company grows, it’s important to start separating personal and business finances. Here’s why: An expanding business is going to incur lots of expenses, and you’ll need to diligently track them to keep your venture profitable. If you mingle personal and business purchases, this task becomes nearly impossible.
But keeping a credit card just for business purchases makes it much easier to keep tabs on your company’s spending. Plus, when tax time rolls around, you’ll have a handy backup record of exactly what can be written off (you should also be keeping detailed notes about this, of course). Win-win!
2. You’ll probably get a bevy of business perks – use them
If you shopped around carefully for a business credit card, you probably applied for one that offers a host of perks that will benefit your business. These often include:
- High spending limits
- Ability to issue cards to employees (see below)
- Extra rewards on office supplies and services
- Expense tracking features
- Travel benefits, such as priority boarding and extra rewards on travel spending
Be sure to take advantage of the great extras your card offers. If you find that you’re not getting a lot of value out of them, don’t hesitate to shop around for a different business credit card. With so many on the market these days, there’s bound to be one that’s a better fit.
3. You don’t have the same protections as with your consumer card
The CARD Act of 2009 put an end to a lot of questionable issuer practices, such as jacking up interest rates without warning and charging excessive late fees. However, it’s important to remember that the new protections we’re enjoying only apply to consumer credit cards – they won’t apply to your new business credit card.
Assuming that you pay your bills on time and in full every month, you probably won’t notice that your business credit card isn’t subject to the rules laid out in the CARD Act. But it’s something to be aware of; keep a close watch on your account and contact your issuer if you see something about your card’s terms (such as the interest rate) suddenly changes.
4. You probably made a personal guarantee to pay the bill
Getting a credit card in your business’s name and using it for company purchases establishes an important boundary between your personal and professional finances. But it’s crucial to recognize that you probably made what’s known as a “personal guarantee” when you signed on to your business credit card. This means that if the company flounders and you can’t pay the bill from its profits, you’ll be expected to use your personal funds to do so.
Again, assuming that you’re careful with your spending and your business’s finances, this probably won’t be something you’ll ever have to worry about. But in the event that your business goes under, you won’t necessarily be off the hook for the credit card bill.
5. You can now issue cards to employees
One of the best things about getting a business credit card is that you can easily issue additional cards to your employees. This makes tracking their spending on purchases and travel a breeze, and frees up some of your time. Now you don’t have to be the only one doing the business purchasing!
Choosing which employees to give a card to is a decision that should be taken very seriously. Although you’ll be able to see what they’re charging, it could still cause a lot of headaches to give a card to a worker who’s not totally trustworthy.
And once you’ve carefully selected who gets a card, it’s a good idea to explicitly lay out your rules about what employees are permitted to charge to the company and what they’re not. Being clear from the outset will help prevent misunderstandings before they arise.
Business credit card image via Shutterstock