How To Use Business Credit Cards Effectively

A majority of American consumers has at least one active credit card account, using it for routine spending and bolstered by the rewards many offer. As most credit users are already aware, card providers also promote a number of business credit accounts. These cards require an active business in order to successfully apply for them, and offer a different suite of benefits aimed at business owners and entrepreneurs.

Recent statistics show approximately 67 percent of U.S. business owners   currently had a business card, but only 24 percent use it as their primary source of financing. It's worth noting, though, that business credit cards represent about $1 out of every $6 spent on all active credit accounts in the U.S., despite representing just 4 percent of cards in circulation. And perhaps most interestingly, almost one-third of business card users said their credit lines comprised the lion's share of the business's capital needs, indicating that many use these accounts similarly to conventional loans.

So business cards are a popular choice with a great deal of flexibility - but is it worth it? Here's what business owners or self-employed workers should know before signing up:

Why use a business card?

Since many small-business owners often rely on personal savings to finance operations, many continue to use their personal credit cards too for ordinary expenses or startup funding. This isn't necessarily a bad idea, but it may open business owners up to a few risks and drawbacks  , unless they switch to a business account:

• Businesses and the people who own and manage them are subject to certain legal protections that do not apply to ordinary citizens, and vice-versa. This is most obvious in the fact that business credit accounts can have their interest rates changed without notice, unlike consumer cards. And the more a business owner uses personal assets for corporate purposes, the more a court may argue they aren't protected. Although it's rare that a small-business owner or single-person company would find themselves in legal trouble, these are nontheless important distinctions.
• Perhaps the most common rationale behind opening a corporate credit account is accounting convenience. By keeping personal and business finances and records separate, organization can be much easier.
• Just like consumers, businesses have their own credit scores and reports that need to be established before lenders feel comfortable extending financing. And like consumer cards, opening a business credit account and using it responsibly is an easy way to establish that trust.

What business cards offer

Business credit cards earn new customers through enticing rewards and sign-on bonuses geared toward corporate users. Some of their special or introductory terms may also make attractive financing options for startup businesses. Business credit cards generally fall into a few common categories:

• Cash back: These cards are straightforward because they reimburse users for a certain spending amount, usually 1 or 2 percent. That money can be put toward paying off balances, or often used for other special offers. These cards are useful for business owners who don't need anything too fancy.
• Travel: For frequent fliers, these cards usually offer big discounts on flights and hotels in the form of points that accrue with each dollar spent. These cards make the most sense for business owners who need to be on the road frequently.
• Low APR: A few business cards will offer an introductory period during which no interest will accrue on balances carried from one month to the next, as long as you're making the minimum payments on-time. This is useful for business owners who need to make a significant purchase and pay it off in installments without accumulating debt. 

Talk to your local Vectra Bank to learn more about how to make the most of a business credit card.