Editor's Note: Learn from a panel of experts and entrepreneurs who have successfully financed their own ventures and are helping others do it at the Thought Leaders Live 2013 event May 29, in Long Beach, Calif. Event and ticket information can be found here.
When your company needs a little extra credit, it might be tempting to fill out one of those business credit card offers stuffed in your mailbox. Before you act, here are a few things you should know.
1. Small-business cards aren't regulated by the 2009 Credit Card Accountability, Responsibility and Disclosure Act, which protects consumers from such practices as arbitrary interest-rate increases. The Pew Health Group warns that such an increase could amount to hundreds or thousands of dollars in extra costs for your business. Just check the fine print: Some issuers have voluntarily adopted these protections.
2. While consumers often look for cards with no annual fees, credit card expert Beverly Harzog of Credit.com says small-business customers should evaluate the full package of costs and benefits, which may include baggage insurance, concierge service, employee-expense tracking and even access to airline clubs. "If the card is offering you something you'd otherwise pay for or that's worth it to you--like having a comfortable place for employees to work if they're stuck in an airport for hours--then it may be worth it to choose that card," she says, "even if it has an annual fee."
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3. Small-business cards are typically issued to the business owner specifically and often require a personal credit score of at least 720 out of a possible 850. And most cards report late payments to both business credit bureaus and the business owner's personal credit reports.
Small-business cards can be good for building business credit and racking up perks, especially if you can channel your expenses onto the card. But beware of carrying a balance, and be sure you can pay the bill on time so you don't damage your personal financial profile.
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