Businesses, once they reach a certain point in their growth, often consider getting business credit cards for their employees.
Things like travel expenses, entertaining clients and even incidental purchases may be a lot to ask an employee to put on a personal card.
But is it a wise move? Should your company open a business credit card account?
There are actually some big differences between personal credit cards and business credit cards.
Even if you are very familiar with how the credit card system works, there are some things that might surprise you.
Here are some things you need to know about business credit cards if your company is considering this option:
1. The CARD Act may not apply.
Although the CARD Act passed by Congress in 2009 protects consumers from things like instant rate increases, that law does not apply to business credit cards.
A card issuer, usually because of a late payment, can raise the APR on all of your business cards – retroactively. This can unexpectedly end up costing your company a bundle.
In fairness, some card issuers have voluntarily adopted the CARD Act provisions for business credit cards, but they’re not required to.
2. Late fees and due dates are different.
Payment due dates and late fee penalties are different for personal cards and many business cards. Personal consumer credit cards limit late fees to $25 for one offense in a six month period and $35 for additional late payments.
A business credit card has no limit on the fees that can be charged. In addition, the due date and the amount of time you have to pay can vary from month to month, so be careful.
“There are benefits and drawbacks
to having a business credit card.”
3. Liability rules are different.
Liability rules can be very different with a business credit card.
If the card has a commercial liability clause instead of “joint and several” liability, the company could be responsible for all charges incurred by an employee.
4. You could receive rewards.
Not all differences between personal and business credit cards fall on the negative side of the ledger.
Business rewards can be a big benefit to companies. Some cards offer free checked bags, employee expense tracking, baggage and travel insurance and more.
If these are things your company would otherwise pay for, they can save you money.
5. You may have accounting benefits.
Keeping track of business expenses – and keeping them separate from personal expenses – is an important part of your company’s accounting.
Many business credit cards come with accounting benefits like monthly and quarterly spending summaries. Some also offer analysis and projections to help your business plan for future expenses.
As you can see, there are both benefits and drawbacks to having a business credit card account. If your company is considering one, research the different offerings available.
Be sure to read the fine print that comes with each card – you certainly don’t want to be surprised by something.
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