Is a business credit card a good idea?

Business credit cards are cards that are given to a small business rather than an individual.  They have a different set of standards compared to a personal credit card. Business credit cards are credit cards that are given in the name of a business rather than in the name of an individual.  The bill falls on the business to settle.  Although the liability for a business credit card falls on the company rather than the business owner, in the end with a small business there is little practical difference between a business and a business owner if a bill is unpaid.

Business credit cards are regulated more lightly than personal credit cards.  As personal credit cards are regarded as a personal financial good then they are treated as something that needs to be reasonably heavily regulated and to have various safeguards built into the system.  Business credit cards tend to be less regulated as they are treated as something that a business can handle in the every day course of events.  Although this means that a lot of the consumer safeguards are not there for business credit cards, it will be easier to take advantage of business credit cards as they will be more willing to increase borrowing limits and to allow money to be unpaid.

One advantage that business credit cards can offer is that they can allow for named employees to have subsidiary cards.  This means that instead of filling in expense forms that some employees can use a subsidiary credit card for expenses and this will be charged on to the main card.

Business credit cards are still relatively expensive compared to other forms of credit.  This is because it is unsecured and very flexible.  The unsecured nature of the debt means that a lender is less likely to know whether or not they will get paid back.  This will mean that the debt is going to be more expensive.  The flexibility of credit card debt also adds to costs as a lender has to keep money aside in case there is a sudden increase in demand.

Although a business credit card is more likely to be approved than other forms of funding, it should not be used to the exclusion of all other forms of credit.  Business credit cards are considerably more expensive than overdrafts or secured lending, and should form a part but not the whole of a business’s credit requirements.