According to National Small Business Association data, roughly 80% of small businesses in the United States use credit cards for company financing. Unfortunately, I’d hazard to guess, that only a small percentage of them also have debt stability. You see, while the CARD Act – the credit card reform law that took effect in February 2010 – contains a provision that prevents issuers from increasing interest rates on existing debt unless a cardholder is at least 60 days delinquent, the law only applies to personal credit cards, which means business credit cards are unprotected.
This is important for two reasons: 1) Most small business are unaware of this legal distinction between business and personal credit cards; 2) There’s nothing wrong with using a personal credit card for business since all major credit card companies hold business credit card users personally liable anyway and report information to their personal credit reports, according to a Card Hub study. In other words, small business owners across the country are not only at the mercy of credit card company executives, but they are also unknowingly putting their companies at a competitive disadvantage by thinking inside the box when it comes to credit card use.
The savviest small business owners are using personal 0% APR credit cards for company purchases that will not be paid off in full during a single billing period and rewards business credit cards for those that will. This strategy not only allows you to find the absolute best credit card terms (no single credit card offers both the best rewards and the longest 0% intro term), but also garner the unique tools a business credit card provides (expense tracking, the ability to set customizable limits for employee cards, centralized company rewards earning, etc.). In addition, the fact that credit cards with revolving balances do not have grace periods for new purchases is not a concern when you use separate credit cards to revolve debt and make everyday purchases.
Not everyone will feel comfortable using more than one credit card for business, however. If you value the simplicity of a single card, there is indeed another option that allows you to garner both debt stability and the aforementioned unique business credit card features. Bank of America has actually proactively extended all the important provisions of the CARD Act to its business credit cards and is the only major issuer to have done so to date, according to a Card Hub business credit card study. Using a Bank of America business credit card is, therefore, a viable option, but remember that this strategy neither allows for the attainment of the best card terms nor protects you from grace period elimination.
Ultimately, regardless of whichever approach you decide to take or whoever ends up residing in the White House, you’ll know that your company is now in a better position to succeed.
About the Author: This article comes from our friends at Card Hub, a leading source for credit card comparison and education.