How important are credit cards to small business owners?

It is important as it is essentially an interest-free short term loan and most credit card companies give some rewards back. So, the user gets the best of both worlds.

What are the best ways to use a business credit card?

Only for business-related purchases/expenses. It would be a big mistake to use it for personal purposes as it might violate tax rule, or takes time and energy to separate the non-business related expenses. But since most business-related travel expenses are covered, it would also be beneficial to use the business card as the reporting of expenses can be simplified. Some new FinTech companies even offer to itemize the expenses for the businesses. It can cut down the administrative costs greatly.

Why use a business credit card for business instead of a personal card?

Again, it is much easier to report business-related expenses when using the right card for the right purposes. Using personal cards for business-related expenses could potentially increase reporting costs.

Does a company need to be incorporated to get a business credit card?

No. Businesses of any size and form can get a business card.

Why don't more banks and credit unions offer business credit cards?

The credit risk for small businesses can be potentially bigger than regular credit card customers. Also, most small banks and credit unions use one of the few big card issuer as their network provider and the cost for small financial institutions can be higher to issue business cards.

All things considered, are business credit cards better than personal credit cards?

In short: Yes! If you do anything for-profit purposes (even freelancing) you can use a business card to get the benefits and almost no downside.

 

This was originally featured on WalletHub's "Ask The Experts" section. To read the full article, visit https://wallethub.com/credit-cards/business/#expert=Leo_Hung_Chan.