As a small business startup owner you’ve probably used your personal credit card to finance some of your business expenses. However, you may want to look into startup credit cards as your business gains traction. This post will go over the 4 main differences between personal and startup credit cards.
With a personal credit card, your name appears on its face and you’re personally liable for any charges and outstanding balances. With startup credit cards, rather than your personal name appearing, your company name will be featured instead. This means your company will be liable for outstanding balances and charges made on the cards. However, it’s very likely the card issuer will make you, or the company principal, sign a personal guarantee upon application meaning that you will still be liable for any outstanding debts accrued.
2. Consumer Protections
In the United States, unlike personal cards, business credit cards aren’t covered by the Credit CARD Act of 2009. This means that your annual percentage rate (APR) could fluctuate without notice. There is also the possibility of being charged various fees that may have been undisclosed. These could include late fees, fees for going over your credit limit or a variety of other charges. Although most card issuers refrain from undisclosed charges, it’s important to understand all the fees involved with your startup credit cards.
3. Credit Limits And Reports
Startup credit cards typically have higher credit limits than are issued for personal cards. This reflects the nature of business expenses and their relative cost. As for credit reporting, a business credit card will allow your company to establish a credit rating which may come in handy if you need further loans or financing in the future. And although a personal guarantee may have been signed by the company principal, the value of the card transactions are unlikely to affect the principal’s personal credit rating unless there is an absolute default.
Startup credit cards may offer different types of rewards than personal credit cards. For example, a business may be more heavily rewarded for purchases in certain categories such as office supplies or communications bills. Similar to personal credit cards, different business cards will have different reward systems and should be chosen according to your company’s needs and spending patterns.
Emburse Startup Credit CardsEmburse is rolling out a startup credit card line that will include built in budgeting tools and a variety of settlement options. Contact Emburse today to find out more.