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What is a Business Credit Card Account?

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  • Written By: Tricia Ellis-Christensen
  • Edited By: O. Wallace
  • Last Modified Date: 15 November 2016
  • Copyright Protected:
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    Conjecture Corporation
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A business credit card account is essentially a revolving credit agreement with a bank or other lending institution. Account holders or borrowers are businesses and in most instances, determination of creditworthiness is based on the business tax identification number instead of on the personal credit scores of any business owners. This can vary, however, and sometimes a business credit card account lender uses both a business and personal credit score to determine whether an account will be opened. This is true for many new business accounts, and it’s important to eventually shift credit reporting and liability solely to the business so owners are not held liable, and businesses gain better credit scores by paying their accounts on time.

There are a number of lenders that offer a business credit card account or several types to successful businesses. Typically each lender’s name appears on the card and is accompanied by traditional credit insignias like Visa®, MasterCard®, Discover®, or American Express®. While these indicate the likelihood of credit being accepted at various locations, they don’t necessarily say much about terms. The lender decides terms and can determine matters like credit limit, interest, and any fees that may accompany using the card, and these, as in personal credit card accounts, can be very variable.

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Another point of variation in a business credit card account is the types of perks or rewards each lender could offer. These are usually intended to encourage use of the card, and they could include things such as cash back on purchases, discounts on travel, frequent flier miles, or bonus points that can be used to make purchases. While rewards should certainly be evaluated, they always need to be evaluated against fees and interest costs of maintaining a business credit card account of a certain type. Sometimes a company ends up paying for rewards when it must pay higher than usual fees or high interest, and this may not be worthwhile.

Clearly, businesses with high earnings, fantastic credit and excellent business growth are most likely to get the best credit card offers, and get accounts with some of the more mainstream banks. They may also enjoy the highest credit limits. Some companies prefer to transact the majority of their business through a credit card account, paying off the total each month, or they use an account to fund the personal business spending of executive employees. Yet small businesses may be able to get reasonable card rates too, if they have made an effort to grow their business credit score. Sometimes, as mentioned, it may take support from an owner’s personal credit to score a first business credit card account.

Just as with personal credit cards, it is important to be absolutely timely on payments and to maintain a low balance. With anxiety in the credit and lending market beginning in the late 2000s, it may not take much to end up with an increase on interest. These matters are not greatly regulated in the US, and creditors may be able to increase interest or lower total amount of credit offered easily and when desired.

Many companies may wonder if they should hold more than one account, and this is a matter of judgment. For small business with few employees, typically only one business credit card account is needed if the available credit is high enough. Some companies maintain multiple accounts to pay for different departmental needs, and these might make sense when a company is quite large.

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