Nearly anyone who can qualify for a credit card may be able to get a business credit card as long as you’re in some phase of running a business. It may mean you’re just starting to develop an idea for a company, sell crafts, work as a rideshare driver, or your startup has finally taken off. It’s important to understand that most business credit cards will require a personal credit check and a personal guarantee. If your company is unable to pay its credit card bill, you’re still on the hook for the charges. However, depending on the type of business credit card you were approved for, it may (or may not) affect your personal credit score.
By the time you’re ready to form an LLC or incorporate, showing that you’ve historically kept business and personal expenses separate offers you protections against “piercing the corporate veil”. The courts use the term to determine if company directors or shareholders are liable for the business entity’s debts or practices. If you’re intermingling your personal bills with your company’s, a court could determine you are personally responsible for any issues that arise in your business.
Start building business credit: Having a good business credit score is just as important as good personal credit history. You’ll need it if you ever want to expand your business by applying for a loan or qualifying for a line of credit. The longer your company’s credit history, the better – even if it starts small.Bigger welcome bonuses: Business credit cards often come with more lucrative welcome bonuses. For example, the Chase Ink Business Cash® card allows you to earn $900 when you’re approved by spending $6,000 in the first 3 months from account opening. The Business Platinum Card® from American Express deposits 100 000 bonus Membership Rewards points into your account. However, most business cards will require a higher spending threshold to earn the welcome bonus, so make sure you read the fine print.More spending categories: Business cards typically expand on the usual grocery store, restaurant and gas station categories. You may have opportunities to earn rewards from office supplies, internet services, equipment purchases and more.
Less credit utilization
Signing up for a business credit card that won’t report your company activities on your personal credit has its advantages. If you anticipate high spending, separating business and personal credit can keep your personal credit score from taking a dive due to high credit utilization. Since the balances you have on a business credit card won’t display on your personal credit report, you won’t see significant dips in your score if you have to make major purchases for your business.
No late payments shown
If you have cash flow issues and miss a business card payment, you won’t have to worry about a late payment mark on your personal credit report. Keep in mind that late payment may not make its way on your personal credit report. Still, American Express, Capital One and Chase may report more serious activities such as a business card delinquency on your personal credit file.
Open account
Credit card companies that check your personal credit may not report its activity but could still show the account on your personal credit file. This could be an advantage because the age of the account and the credit limit can boost your credit score without the negatives of payment history.
Missed payment history opportunity
If you’re still building your personal credit score, spending less on your personal cards (or not at all) and making good payments to your business credit cards only helps your company’s credit standing.
You’re not fully in the clear
Even if a card company does not report your payment history to the consumer credit bureaus, they may still report serious negative activity such as delinquency, collections or charge off. You’re trading the opportunity to build your personal credit for the perks of a business card. However, you’re still potentially at risk of damaging your consumer credit score if your business fails. Brex, Stripe, Silicon Valley Bank and Ramp offer business credit cards with no personal guarantee. Your bank or credit union may also offer one. Although business and personal credit are different, they may be tied together if you choose a business credit card or loan that requires a personal guarantee but only reports payment history to the business credit bureaus. In addition, some business credit cards report to your personal credit report.
