Have you ever wondered what the difference is between a credit card aimed at business owners and a regular credit card?  Perhaps you own a small business or your own company and are interested in getting cards for business use.  Business credit cards are for the most part like consumer credit cards with a few exceptions – let’s take a look at them and see how they work and if they are the right tool for you to use in your business.

First, business cards are issued in the business name by using business financials – most of the time.  We say most of the time because the exception to the rule is for sole proprietorships where the credit card is the responsibility of the sole owner.  That means if the business goes belly up, the debt is the responsibility of the owner.  For other forms of business the credit card is based on the business entity – if the business goes under then no individual is responsible for the debt directly.

Of course, the downside to all of this is that in order to qualify for the card your business must have a financial background that can be verified.  This is often done based off the tax id number assigned to the business.  Just like the consumer credit market, the business credit market tracks payment and default histories of businesses.  Most business owners will find they may have a hard time getting a card in the business name for a year or two after they establish a business because of the lack of credit history of the company.

Next, many business cards are payable in full each month – a big shift from the consumer credit market where you can pay a small portion of the total balance every month.   Though some business cards may offer payment plans as well you will often find that they carry much higher interest rates.

Who can get a business card inside your company?  Even though the main account is often issued in the company name using company financials, individual cards attached to the main business account often has set credit standards that the individual must meet.  The individual is not responsible for the card, but they still must have a rather decent credit history in order to be able to get a card issuer in his/her name.

Finally, it’s a good idea to remember that business credit cards are meant for business purposes.  Sometimes the cards are limited in what they can be used for – for example, some business cards will not work at amusement parks, casinos and other entertainment venues.  Most businesses can also request that the cards be restricted even further so that they cannot be used at restaurants, gas stations, etc.

Business credit cards are a good financial tool for a growing business to use in order to help track and manage finances better.  However, like any financial tool, they must be used responsibility and for internal accounting controls must be tracked and reconciled on a monthly basis.  The potential for misuse of funds increases anytime a new card is issued in the name of a business.