Small Business Credit Cards As An Alternative To Loans–What Business Owners Worry About And Protections For Business Card Users

There are some businesses who are able to access lines of credit through small business credit cards as a way to keep a revolving line of credit available for purchases that may need to be made more periodically than those which are usually met through a small business loan. While small business credit cards do you offer incentives and assistance, in terms of rewards or perks that may help a business owner with expenses like travel, there are still some who are concerned over protections that may not be in place for business owners and, in terms of simply using a credit card for a business in general, there are some business owners who do worry that this could bleed into other areas of their financial life if debt from this particular type of card becomes too much for a business owner to handle.

Here in July we are seeing average rates on business credit cards around 13% to 14%, but borrowers need to be aware of the fact that there could only be high rates offered for their business or some rates that are advertised may simply be introductory and could increase at a later date. While the majority of cardholders, be they consumers or businesses, will review the interest rates that are being offered on a credit card, it needs to be remembered that if a business plans to carry a balance on their credit card, the interest rate they receive will heavily factor into the overall costs they must meet and, if an affordable rate cannot be obtained, a business credit card could either end up being quite costly or may need to be applied for at a later date when the business can improve their credit standing.

Also, businesses that are in a position where they may be able to benefit from the proper small business credit card need to remember that, for the business owner, there are many lenders who will hold them personally liable for the debts they acquire, and this is where some companies have opted to use personal credit cards to make business purchases, as there are protections under the CARD Act that can be beneficial in these cases.

Where cardholders run into trouble is usually differentiating between business expenses and personal expenses, particularly when they are filing taxes, and there are some businesses that are simply looking for options like travel reward points from a business credit card that may make them think twice about using personal lines of credit. While there are many arguments to be made against using a personal credit card for the purposes of business, some advisers feel that there are small business credit cards that can be fair and helpful to companies who need to continually purchase supplies on credit, or may need this line of credit for certain expenses throughout the year, but of course relying on credit for all purchases could be problematic too.

If a small business owner is attempting to simply get off the ground with the use of a small business credit card, this can be accomplished if proper research is done and the best card is selected, but businesses who are relying on credit, rather than using a credit card and paying down the debt monthly with money that is already on hand can end up causing a great deal of financial distress if a business hits hard times.

It’s concerns like these that have many small business owners questioning whether a small business credit card will be helpful for them, even if it can be used as an alternative to a small business loan, but business owners who are careful to compare credit card offers for their business, review any perks or rewards that may make the cost of a business credit card worth it, and who attempt to move away from relying on credit may find that a business credit card can be helpful for their company.

While businesses may keep a credit card to simply continue and build on their credit history and score, the designers must also ask why they want a credit card, are there better alternatives to a small business credit card, and if a card will be right for their business, looking at various lenders and reviewing the fine print on these cards will be necessary so that a business owner will not fall prey to problems related to debt they have acquired.