As some reports have indicated that access to credit for small businesses is becoming more available, there are companies who are considering or have been seeking credit card options as a way to begin reinvesting in their organization through the purchase of materials, inventory, or other necessities that may be vital for the success of their business. Yet, small business credit card options, while they may be offered from a variety of lenders, is often a debated topic in terms of whether small businesses should use a business credit card or stick with a personal credit card due to protection that comes from the CARD Act.
Businesses obviously need access to credit and capital as a way to survive, but when it comes to using a small business credit card, there are both advantages and drawbacks to certain businesses acquiring a small business line of credit versus the business owner simply using their personal credit card as a way to invest in their company. Again, personal credit cards can be helpful in that the Credit CARD Act will protect them against certain practices by financial institutions, yet business credit cards are not under these new rules and regulations concerning fair credit card treatment.
Yet, some of the advantages of a business credit card is that it can separate business from personal financial expenditures, which will be beneficial as a business owner will simply be able to keep their personal financial life outside of liabilities that may come from their business. Yet, some business credit cards may also offer different repayment options which can be more beneficial for a company and there are rewards programs for business owners who may have a particular card.
However, credit card lenders who offer businesses a line of credit are, again, not under any obligation to adhere to new credit card rules that apply to personal credit cards and, these lenders can increase interest rates on existing balances and there are no caps on the amount they can charge for late fees, both of which are changes that are now applied to personal credit cards. Business owners that do feel a business credit card will be best for their company are not automatically going to suffer from choosing this route and line of credit as there are a great deal of offers and various lenders who may implement similar rules that have arisen from the CARD Act.
Essentially, business owners are heavily advised by many business counselors to not only research various small business credit card options but make sure they completely understand any fee structures, options lenders have in terms of increasing interest rates, repayment requirements, and essentially what pros and cons may be associated with a particular card and lender. While there are small business owners who do use personal lines of credit to invest in their company, this can be troublesome as a failure to repay these debts will obviously bleed into a business owner’s personal life and this could amount to further financial troubles.