Credit cards for small businesses can offer various financing opportunities and benefits which can be accessed by these companies who may either be in their early stages or looking to continue growing in a particular market, but there are some instances where small businesses may run into problems if they are using their business credit card for specific purchases. While a line of credit for a business can be incredibly helpful, particularly when access to capital may be needed periodically throughout the year and, if this is the case, a small business loan may not be right for this particular situation, but there are some considerations that business owners must make before choosing a card for their company.
Understandably, some businesses can use their credit card for small purchases, like inventory or for something as simple as furniture, but when it comes to expensive purchases that may require that a business owner carry a balance on the card for a longer duration, this could be problematic. Some companies will choose a business credit card due to rewards that may be offered, like airline miles as an example, but researching the right card for a particular business will be necessary due to the fact that there are some aspects of business credit cards that can come back to haunt a small business owner.
As an example, Bankrate.com made mention that protections that were implemented by the CARD Act will not help small business credit credit card users, and this could be a problem if a business credit card is used for particular purchases. Aspects of the CARD Act, like prohibiting sudden rate increases, can be greatly helpful for consumer credit cards, but businesses are not under this protection and, if a credit card lender wants to increase a business owner’s rate or levy certain fees, there is little protection offered under this particular set of rules.
Yet, there are businesses who would argue their credit card lender has offered them a great deal of assistance and has not been difficult to work with, in terms of sudden rate increases or fees. There are numerous options for small business credit cards and many come from reputable lenders who, again, worked to establish good relationships with the small businesses who may use their card frequently, but there are also some concerns that advisors have when it comes to using a small business credit card to make large purchases.
Certain aspects of a business, like buying equipment for example, could be a more long-term debt obligation, and would obviously cause the overall costs a business owner will pay to increase if they use their credit card. While, again, some cardholders may have an affordable interest rate, if they put a great deal of debt on their business card that could take a longer period of time to repay, the interest costs could become problematic, especially for smaller businesses or companies that may have recently gotten off the ground. While not only should interest rates be reviewed by business owners, the uses of a particular small business card and any rewards that may be specifically beneficial for their company need to also be considered before a card is chosen and, obviously, when it comes to finding a credit card for a small business, financial counselors stress making affordable purchases on these cards that can easily be repaid so that companies will not have to carry a balance, particularly on a card not covered by CARD Act protection.