Using Technology Improvements To Help Differentiate Small Business Credit Cards From Personal Credit Cards
There is one major difference from small business credit cards from the usual personal credit cards that pretty much everybody keeps in their pockets. A personal credit card has a generally low credit limit and a reasonably average interest rate. You will most likely find a credit card that will give you from $1,000 credit to $10,000 credit with an average APR interest between nine percent (9%) to twenty percent (20%). During the credit cycle, any remaining balance that transfers over to the next credit cycle will more or less carry a high interest rate or penalty fee. Small business credits cards, on the other hand, are quite different.
Credit cards for small business purposes are just one example of a business line of credit or business LOC. A line of credit works similarly to a credit card because you get a credit limit that you can draw money out of from time to time but the rates and terms are slightly different from those listed just above. First of all, most line of credit offers do not have a penalty fee or balance interest whenever a balance is carried over to the next credit cycle. They also have a different interest rate that goes from around twenty percent (20%) to twenty five percent (25%). This may seem a bit high for some but then you have to consider how high your credit limit can be. With a business line of credit you could see credit limits stretching to fifty thousand dollars ($50,000) to several hundred thousand dollars.
In this way a business line of credit and small business credit cards are very different from small business loans. When you get a business loan the bank or the creditor will lend you a large sum of money. Once you receive you will have to start paying it back immediately like an installment plan. These loans can have very high interest rates and long payment schedules. A business LOC works pretty much just like any credit card. You draw out the money only when you need it so long as you do not exceed your credit limit and always get to be on a credit watch.
Benefits of Small Business Credit Cards
So where can you use these types of credit cards? If you take the time to study the limits and payment terms of business cards you will find that they are not ideal for purchases. This is because they are not meant for buying small amount of items or for general shopping. They are meant to serve as a capital resource for your business. Most businesses have a large gap between their investment period and their revenue collection period. In between those periods they have to constantly spend money. That is where these business credit cards come in handy.
Say for example that your business has to spend a few thousand dollars every first day of the month but you only membership profits every quarter of the year. In between those periods you will have to spend to pay for employee salaries, utility bills, maintenance and managing stocks and shares. To pay for all these you will utilize small business credit cards. You have more options when it comes to paying a line of credit and banks are generally more lenient when it comes to how and when you pay. You could opt to pay it like a regular credit card by paying every month but you could choose to pay it bi-monthly or even quarterly. This will give you more breathing room in between your investment and revenue seasons.
Getting a Line of Credit
When you apply for small business credit cards your personal credit score will come into play. They will give a good look at how you as an individual handle credit and how you manage your own personal payments. They will then look into the business and how well it earns its profits to determine the initial credit limit that will be allotted for you. When you do get approved for this kind of credit it will most likely fall as an equity line of credit. This means that if you fail to pay the credit over a period of time the bank will acquire your business assets. They could take anything from the office space you operate in to taking your furniture, computers, and operation tools. This is usually what happens when a business with a high credit fails to pay after several months of profit losses.
Top Three Small Business Credit Cards
While a line of credit can come in many forms, small business credit cards are by far the best you can go for. This is because they, like regular cards, can have a rewards system and since you will be spending often with these cards you will not have to wait long to reap the benefits of your invested bonus points. Here is a quick rundown of the top three cards you should look into whenever you are planning of running a small business in town:
The Ink Cash Business Card – this comes from Chase. It has absolutely no annual fee, 0% APR for balance transfers and purchases for the initial six months, and it gives out a total of 25,000 reward points for spending at least $5,000 within the first three months of owning the card. That amount is equal to a redeemable $250. You get 5% cash back rates for spending on business supplies, phone services, and cable services.
The Ink Class Business Card – this card again comes from Chase. This card is designed for small business owners who have a very good credit score. It carries all the benefits of the Ink Cash and also gives out two reward points you reach a total purchase of $25,000 annually for lodging and fuel plus another five points for every dollar if you spend $25,000 on office supplies, phone services and cable services.
The True Earnings Business Card – this card comes from the leading rivals of the Ink business credit card, American Express and Costco. With this card you can get a total of 4% cash back rates for all gasoline purchases, 2% cash back rates for traveling and restaurant expenses, and 1% on just about everything else. If you use this business card to fulfill your Costco membership then you will not be paying any annual fee.
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