Best Business Credit Cards: The Ugly Truth

While small business credit card usage is on the rise according to the 2009 Small Business Credit Card Survey there is an ugly truth that surrounds the industry. I hope to provide you with some truthful insight into what factors you should consider when determining the best business credit cards for your company.

Unfortunately the majority of all small business owners fail to understand the importance of what’s in the fine print and what impact a business credit card can have on their business from both a credit reporting and liability standpoint.

Statistics even show that over 65% off all small businesses use credit cards on a regular basis; but the problem is less than half of those credit cards are actually in the business name.

First, you should be aware that there are over 500 business credit cards available in the marketplace but less than 70 report your payment history to the business credit bureaus.

As a business owner one of your goals should be to establish and build business credit separate from your personal credit. By using business credit cards that do not report your payment history to the business credit bureaus you miss out on a huge opportunity in building a stronger business credit profile.

In addition, there are less than 40 business credit cards that will extend cash credit cards to your business without a personal guarantee. However, the only way you can obtain these types of cash credit cards is by first establishing a strong business credit file.

Here are my ‘Top 4 Types of Business Credit Card Applications’ you should know about:

The Business Credit Card Wannabe

This business credit card is by far the worst and in my opinion very misleading. It doesn’t matter how much fluff or creative sales copy is used by these particular companies what matters is what’s in the fine print! In a nutshell this business credit card application is nothing more than a glorified personal credit card.

The application requires your personal information, social security number, and business name only.  No Tax ID# or Duns# is required.

• Disadvantages
• Personally liable for all debt
• All charges and debts are reported on personal credit files
• Impacts personal debt to credit limit ratios

The Business Credit Card Poser

This business credit card is doing its best to be a true business credit card but it doesn’t quite make the grade. In a nutshell this card still requires a personal guarantee but what makes it appealing is your payment history and credit card balance are solely reported to the businesses credit reports not your personal credit files.

The application requires your business information, Fed Tax ID#, Duns#, personal information and social security number.

• Personally liable for all debt if the business defaults

The True Business Credit Card

This is the true business credit card in my book and what truly represents what every business owner should strive to obtain. A card that is tied to the business and completely separate from your personal credit. This card is the best of both worlds! The payment history and balances report solely on the business credit reports and there is no personal guarantee keeping the liability strictly tied to your business.

The application requires your business information, Fed Tax ID#, Duns#, personal information but no personal social security number. (No personal guarantee)

Disadvantages 

• NONE

*Keep in mind there are also business credit cards that allow you to apply with business information only and no personal credit check. However, if you’re business credit scores and files are not strong enough they may require a personal guarantee for approval.

I encourage you to be as proactive as possible and begin inquiring about how your payments are reporting when dealing with vendors, suppliers, credit cards, and leasing companies.

Marco Carbajo is founder of Start Business Credit.com

You may contact Marco directly at: ceo@startbusinesscredit.com

Follow Marco on Twitter @MarcoCarbajo and read more of his insights on BusinessCreditBlogger.com