Similar to a consumer credit card, a business credit or debit card offers the executives or employees of a business a line of credit. However, the line of credit is usually reserved for purchasing business-related goods and services. A typical company will issue business cards to enable their employees to make necessary purchases that facilitate their operations. In addition, companies also use the cards as a straightforward way to track business expenses. However, there are several notable differences between consumer credit cards and business credit cards.
Business Credit Cards May Not Have Consumer Protection Coverage
Standard consumer protection laws — such as the Credit CARD Act of 2009 –does not apply to businesses. As a result, business cards may be subject to unusually high fees for minor lapses, such as a late payment. Additionally, the annual percentage rate on a business card can fluctuate greatly and without warning, which can negatively impact a company’s bottom line. This is especially important to a business that may already be paying a lot of fees, such as a company that has a merchant account and pays credit card processing fees.
Business Cards May Only Offer Business Rewards
Unlike personal cards, a business card may only provide rewards that are specifically tailored for businesses. For example, some cards may offer discounts on business airline travel, office supplies and utility services. Personal cards, however, may offer a flat cash back bonus on all purchases. Furthermore, some rewards can also help a company potentially save a lot of money on business-related expenses. For example, some business card issuers may reduce or eliminate the fees that are associated with a merchant account, which can add up if a company does a lot of credit card processing.
Higher Credit Limit
In general, credit card issuers tend to extend the average business a much higher line of credit than the average consumer. This is beneficial to most businesses — especially if they regularly make expensive purchases — because it temporarily frees up cash for other business expenses. The amount of credit that a business is extended depends on its credit score, which a business credit card issuer can obtain from the three major credit bureaus and — if applicable — Dunn and Bradstreet.
Credit History Reporting
Many business credit card issuers do not report a company’s business credit history to the major credit bureaus unless there is a problem. For example, a company may be reported if it is seriously delinquent or misses a single payment. However, a history of reliable on-time payments is usually not reported.