What is Business Credit Cards? Everything You Need to Know

Today we’re gonna talk about everything you wanted to know about Business Credit Cards. But first, if you are new here we’re all about how to maximize the value of your Credit Cards. So basically how to get the most cash back and also how to travel for free.

Let’s get started…

Applying for Business Credit Cards

The first thing we’re gonna talk about is applying for these Business Credit Cards. So for most of them assuming that you’re applying for Business Credit Cards and not Corporate Cards. So we’re gonna talk about Corporate Cards towards the end of the article.

For Business Credit Cards they’re still going to be looking at your social security number. Even if they ask you for the EIN (Employer Identification Number)they’re still going to ask you for your social. So again it’s going to be a hard inquiry and depending on other factors and depending on who you’re applying with.

What rules are going to affect you while Applying for Business Credit Cards?

For example:

If you’re personally over five twenty-four and you apply for a Business Credit Card. Even if you’re using your EIN they’re going to ask for the SSN (Social Security number). Meaning that you’re not going to be able to get certain Cards at the chasing preferred Card.

Another thing to consider is that of most Business Cards you’re going to be personally liable.

Whenever you apply for a Credit Card there’s a bunch of terms. Most people don’t really read these but again if you look at them directly and actually read. If you’re going to see that you’re personally liable. This means that if you have a Credit Card and again if the company defaults you can’t really file bankruptcy to run away from this debt.

One of the really big benefits of having a business is that you don’t have personal liability. But again if Credit Cards you do still have that personal liability.

On a similar note if you issue employees Cards then you’re going to be liable for any transactions as well. So hopefully you have enough internal controls just to make sure that there aren’t any fraudulent transactions.

Again obviously if there is a fraudulent transaction what you can choose to basically sue the person or charge them. But you really don’t want to go through that process. I think it’s better to be preventative rather than have to deal with the consequences.

The Reason having these Business Credit Cards

Given everything that we just talked about what’s the point of having these Business Credit Cards. They sound pretty bad and they sound pretty dangerous.

The main benefit is that it typically has different categories compared to personal Cards sometimes different benefits as well.

Meaning that you can really optimize your spend.

For example:

Cards at the Chasing Cash Card give you 5x and points back and office supply stores as well as well for cable bill and also your phone bills.

Another reason people pursue these Cards is that some of them do have a really great sign up bonuses. So again if you really want to maximize the return underspend for a big purchase. This is a really good way to do it.

For example:

If you look at a Card like the Chase Sapphire Preferred and even the Reserve. You’re getting 50,000 points after $4,000 a minimum spend of the chase a preferred Card. You’re getting 80,000 points to 30,000 points more for only $1000 more in spending. So $5,000 that are $4,000.

Who is Eligible for a Business Credit Card?

The one thing a lot of people don’t seem to realize is that businesses come in all shapes and forms. So again yes you have the corporations have other pass-through entities! But you also have sole proprietorships.

A sole proprietorship is basically when you’re operating as yourself providing a service. So whether I am fund plumbing or funk photography or maybe from consulting or computer development. That would be considered a sole proprietorship depending on what state you’re in.

There were different requirements for what you need in order to get a bank account or in order to get a Credit Card as a sole proprietor.

For example:

In California: As long as you’re operating under your own name and you actually don’t need any additional paperwork.

Another thing to consider to a Business Card applications is that even if you have $0 in income you can still get approved for a Card. I’ve had friends who are thinking about starting sole proprietorships. Mostly doing side hustles on the side doing software development.

They’ve been able to get Cards saying that they’re either getting zero revenue are based off. What they expect to make which is probably between $10 to 20,000.

What Transactions Can You Use Business Credit Card?

Once you get approved for this Credit Card what transactions can you use it for?

So technically you can use it on everything. But based off the terms you’re only supposed to use it towards business expenses. Obviously, this gets a bit more confusing especially if you are a sole proprietor. Just because there’s kind of a weird line between personal and business.

For example:

Let’s say I had a website which earns on the advertisement of Adsense that only did gaming and then deriving income from that. Meaning that I have to pay taxes. If I don’t have another corporation then it’s going to be a sole proprietorship.

If I buy a Nintendo switch and I play games on and I also play games on my own time that’s unrelated to that Channel then is it still a business expense.

So again it really just depends it’s kind of a great line.

To me at least as long as it’s justifiable. So if there is some way at all that you can defend. Then I think it’s fun. Even though they do have it in the terms one thing I do a lot is obviously research data points and research other people’s experiences. Typically on forums and I’ve never heard of anyone getting their account shut down. Because they made purchases that were not business expenses.

Risk of Using Your Business Credit Card for Non-business Expenses

The biggest risk of using your Card for non-business expenses isn’t really shut down. It said you lose consumer protections. Whenever you apply for a new Card or if you do a product change then you’re probably going to get one of these guides.

Again they go through a lot of the benefits you have as well as the protections.

The main risk, in my opinion, is really Black Swan offence. So these are unlikely events that can have a very negative effect on your life.

A really good example of this:

If you rent a car and again you use your Business Card and you’re hoping to rely on the protections for the CTW (Constructed Travel Worksheet). Maybe you do have an accident which isn’t really expected. Because you don’t typically get into accidents.

Now if they look back at it and they’re like… Hey, when you rented this car was it for a business exercise. Was it for maybe going to a job or doing something or was it personal.

I’m not really sure who the owners are on but I really wouldn’t put yourself in a position. Where again if you can’t prove that it was a business expense you might be out at CDW (Compliance Data Warehouse) benefit. Meaning that you might be paying $20,000 of your total car.

Another common question is “What effect two Business Cards have on your personal credit report?”

What Effect of Business Credit Cards have on Your Personal Credit Report

For the most part, they don’t really have that much of an effect. So typically they only negatively affect your accounts and not positively.

Again we have utilization we have payment history to our Kotori marks, the average age of accounts, total accounts and credit inquiries.

For most Business Credit Cards they do not show up as utilization. So that might be really good for you or it might be really bad. Depending on how you use your credit!

If you’re someone who keeps that balance on their Card that it typically does make a lot of sense to keep it on the Business Card. Just because it’s not going to show up as a really bad utilization amount compared to using it on a Personal Card.

For the payment history, most Business Cards will not show your positive effects. Meaning that all the good payments that you do that you pay off your accounts will not we be counted.

On the other hand though – Raaga Totori marks are affected. This means that if you default on your accounts it’s going to show up in your personal report. The average age of accounts and total accounts also are typically not affected. But inquiries are just because again you’re taking that hard inquiry in order to get this account.

A lot of people actually use Business Cards as a way to stay under five twenty-four since they don’t show up under total accounts.

Everything I just said applies to Chase applies to Amex applies to most of the major issuers. The only issuer that it does not affect so the one that posts to your credit report is Capital One.

This means that if you get a Capital One Business Card it’s gonna show up on your report as a total account. It’s gonna show all the payments and all the other stuff. So it might be good for you it might be bad it really just depends on your circumstances.

The final thing we’re going to talk about is Corporate Cards.

What are Corporate Cards?

The final thing we’re going to talk about is Corporate Cards. So these are targeted more towards big companies rather than small companies. If you get a job at IBM or any other big company if you do have expenses. They typically issue you one of these Cards and they encourage you to use it.

In order to qualify for Corporate Cards, you typically need a corporation and you also need to submit three years of financial statements. Sometimes they also ask you for tax returns just to validate information as well.

Each Bank has their own requirement but I typically want to see that you’re making a lot of money and that you have a lot of transactions.

My guess is that they assign you an Account Manager and again they want to make sure that they’re getting positive expected value.

If we pay with Amex as a tool we can kind of see what they’re looking for. The Open Cards are the ones we talked about earlier… So they’re the Business Cards that we typically talk about.

For most people, I don’t really think you need to worry about Corporate Cards. Unless you run a big corporation then that might be helpful. But for the most part, most people reading this probably don’t fall into this situation.

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