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.