Learn

Advanced

Six Common Business Credit Card Myths

Sean Bryant

1 Comments

June 29, 2020

When an entrepreneur first starts a business, cash flow is crucial. Many will get loans to fund the initial effort. Some will seek out help from family and friends. Others will turn to credit cards as a way to pay for the expenses that come with a new business. There are some common myths about using business credit cards.. Let’s go through them so you don’t risk your business and credit score.

You Need an EIN to Apply for a Business Credit Card

One of the most widespread business credit card myths is that you need to be a corporation to be approved. The truth is that anyone can apply for a business credit card, even if you don’t own a traditional business with an EIN number. Instead you can apply as a sole proprietor.

The IRS defines a sole proprietor as “someone who owns an unincorporated business by himself or herself.” Maybe you sell items on ebay, operate a small lawn care business or act as a consultant. If you are earning revenue, then you are a business owner in the eyes of the IRS.

If you are a sole proprietor applying for a business credit card, you would use your legal name as the business name and your social security number would be your tax ID number.

One thing to know before applying for a business credit card is that certain issuers will report activity to consumer credit bureaus. You might be asking yourself why they would do this. The answer is because they want to have a personal guarantee that you are going to pay back the money you borrow. If you would prefer to to keep your personal credit out of the equation, then consider a card from Bank of America, Citi, or Wells Fargo. Chase, American Express and US Bank are other options because they will only report negative information to consumer credit bureaus.

Employee Cards Can Be Expensive

One of the nice things about having a credit card for your business is that your employees can have cards on the same account. If you have a rewards card then this can help increase the amount of rewards you can potentially earn each month.

However, some people believe that employee cards will end up costing the business more money. While there are certain cards that have a fairly steep annual fee for employee cards, there are a bunch that are completely free. If you’d like to provide your employees with company cards, then consider one of the following credit cards.

Chase Ink Business Cash Card
Chase Business Preferred Card
Amex SimplyCash Plus Business Card
Business Gold Rewards Card from American Express ($50 for the first card, $0 for every other card)

You Need Excellent Credit for a Business Credit Card

While it’s true that you need excellent credit to get a majority of the business credit cards available, there are still options. The Capital One Spark Classic for Business card will approve you even with average credit. If your credit is lower than that, you might need to start with a secured card. The Wells Fargo Business Secured card or BBVA Compass Business Secured Card are great options.

With a secured business card you will be required to put down a deposit that will act as your credit limit. These cards will help you improve your credit score and eventually move into a credit card that will offer more benefits for your business.

Using Your Personal Credit Card for Business Purchases is Acceptable

When starting a business many entrepreneurs might turn to their personal credit cards first. While this might seem like an easy solution, it can come back to cause problems in the future. If your expenses start getting close to your credit limit, this will push your credit utilization to unfavorable levels. Because this makes up a large piece of your credit score, you would start seeing your scores drop. This could also affect your ability to obtain additional financing in the future.

Applying for a business credit card will keep this from happening. As we mentioned earlier, only select issuers will report any activity from a business card to consumer credit bureaus. As long as you don’t default on your account, you should be able to keep everything separate.

Personal Credit Cards Will Offer More Attractive Rewards

It’s no secret that there are a lot of personal credit cards offering very attractive rewards. Many people feel these rewards are better than what business cards can offer. This is actually the opposite from the truth. There are cards that offer $500 and even cards that offer up to 100,000 points after meeting spending requirements.

Where business credit cards really differentiate themselves from personal cards is with purchases rewards. Many personal cards have rather low limits on purchases that can earn a bonus. The Chase Freedom card has a limit of $1,500 per quarter in combined purchases. However, the Chase Ink Business Preferred card offers bonus points on the first $50,000 each year in select categories.

So why do credit card issuers offer such generous bonuses to businesses? The answer is simple. Businesses are more likely to carry debt from one month to the next, which means a greater profit.

No Pre-set Spending Limit Credit Cards Actually Have Limits

If you’ve never heard of no pre-set spending limit credit cards, you’re probably not alone. These cards sound like they might come without a set credit limit, but they actually do. As an example, let’s consider American Express. Many classic American Express cards, like the Business Platinum card, are not credit cards, they are actually charge cards. Instead of being able to carry a balance from month to month, you are required to pay off your balance at the end of each statement period. That makes it seem like you can charge as much as you want as long as you pay it off. However, this is not the case.

Card issuers will actually set a spending limit for each cardholder based on certain criteria like income, payment history, past spending patterns, etc. But the truth is, no many businesses know how much they might need to spend each month. That means it’s important to make sure you keep your spending in check. If you end up hitting your limit, then there is a chance they could report this behavior to consumer credit bureaus.

For anyone just getting a business off the ground, a business credit card can be a big help. It’ll provide you with the liquidity you need to enable growth. Just be aware of how your credit card works. By not understanding the way business cards operate, you could be risking your business and your personal credit score.

Editorial Disclosure: Opinions expressed here are author's alone, not those of any bank, credit card issuer, hotel, airline, or other entity. This content has not been reviewed, approved or otherwise endorsed by any of the entities included within the post.

UGC Disclosure: The responses below are not provided or commissioned by the bank advertiser. Responses have not been reviewed, approved, or otherwise endorsed by the bank advertiser. It is not the bank advertiser's responsibility to ensure all posts and/or questions are answered.

Chase Ink Plus Business vs Amex EveryDay Preferred: Which Card Is Right for You?

RewardExpert

0 Comments

July 29, 2020

If you’re looking for a credit card that’s part of a major rewards program that gives you the flexibility to transfer points to several different airlines, you should consider the Chase Ink Plus Business and American Express EveryDay Preferred cards.

Both cards are great, but often overlooked options for getting into the Chase Ultimate Rewards and Amex Membership Rewards programs. If you’re a small business owner or independent contractor, the Ink Plus card may in fact be a better choice than the perennial favorite, the Chase Sapphire Preferred. It comes with a larger sign-up bonus and, depending on your spending habits, potentially better bonus earning categories for purchases.

In the American Express lineup, the EveryDay Preferred card sits between the standard EveryDay card and the oft-recommended Premier Rewards Gold card. While the standard EveryDay card is a good no-annual-fee option, it has a smaller sign-up bonus and less generous bonus earning categories.

The Premier Rewards Gold card is good too, but it has a higher annual fee and, depending on your spending habits, potentially less lucrative bonus earning categories than the EveryDay Preferred card.

Here’s a brief overview of what the Ink Plus and EveryDay Preferred cards have to offer:

Which card will be right for you? Let’s take a closer look:

Sign-Up Bonus

Ink Plus comes with a much bigger sign-up bonus. At 60,000 Ultimate Reward points, it dwarfs the EveryDay Preferred’s 15,000-point bonus. You’ll have to spend $5,000 in three months to get the Ink Plus bonus, compared to only $1,000 for EveryDay.

The minimum spend for the Ink Plus is higher than most, but it works out to only $1,666 a month. That’s doable, particularly if you plan a few big purchases right after you get the card.

Flexibility

With 17 airline transfer partners, the American Express Membership Rewards program is hard to beat. Those partners include Delta, British Airways, ANA, Air France, KLM, JetBlue and Virgin America. If you like luxury flying, you can also transfer points to Emirates and Singapore Airlines. You’ll be able to book award travel with any of the three major airline alliances, so you’ll be able to get wherever you want to go.

There’s no doubt that you’ll have less flexibility in how you spend your Ultimate Rewards points, but Chase has chosen its airline partners wisely. You can transfer points to British Airways, Air France KLM, Korean Air, Singapore Airlines, Southwest Airlines, United and Virgin Atlantic.

You’ll have access to all three of the major airline alliances since United and Singapore Airlines are Star Alliance members, British Airways is a oneworld member and Korean Air belongs to SkyTeam. Plus Southwest, the world’s largest low-cost carrier, is great for domestic flights and Ultimate Rewards is the only program it partners with.

You can also purchase travel directly from either program’s online travel center. While you can potentially get more value for your points by transferring them directly to airlines, online travel centers are a good backup to have if the best redemption rates aren’t available or if you want to fly on a carrier that is not a partner.

Earning Potential

Both cards come with excellent bonus earning categories, but Ink Plus edges out Amex with its impressive five points per dollar for certain purchases.

You’ll get quintuple points on office supplies, landlines, cell phones, internet and cable. And recurring bills, like phones and internet, can quickly boost your points balance. The card also offers double points on gas and hotels. You can earn bonus points on up to $50,000 of annual purchases in each of the 5x and 2x categories.

The EveryDay Preferred card gives you triple points on groceries, something most of us buy regularly. Unfortunately, that’s only available for up to $6,000 in purchases annually. Like the Chase card, you’ll also get double points for gas.

What Else Do You Get?

The EveryDay Preferred card gives you 50 percent more points if you make at least 30 purchases in a billing cycle. This is a great benefit if you can take advantage of it. For example, if you make 30 purchases that earned 4,500 points in a month, you’ll get an additional 2,250 points.

The Chase card includes a 20 percent discount on all travel purchased through the Ultimate Rewards travel center. This helps make up for the fact that you won’t be getting the maximum value for your points since you aren’t redeeming directly with an airline.

Cardholder Perks

These cards come with similar cardholder benefits. You’ll get rental car insurance, roadside assistance, extended warranty on purchases, return protection and purchase protection.

The Amex card also includes travel accident insurance, dispute resolution and a global assistance hotline. Ink Plus includes trip cancellation or interruption insurance and access to Ink, Chase’s small business support program.

The EveryDay Preferred card has a 2.7 percent foreign transaction fee, whereas the Ink Plus does not charge extra for international purchases. That’s important to keep in mind if you’re planning to travel abroad.

Annual Fee

Both cards have a $95 annual fee that is not waived the first year.

Which Card Do You Get?

In most ways the Chase Ink Plus Business card is better than the Amex EveryDay Preferred card. It has a notably bigger sign-up bonus, unbeatable quintuple-point earning categories and slightly better cardholder perks, including no foreign transaction fees.

But the Amex card has a few things going for it. Triple points for groceries are great, plus you’ll get 50 percent more points if you make enough purchases in a month. That can add up fast. Best of all, the Membership Rewards program has a lot more airline transfer partners. You can’t beat it for flexibility.

If you’re looking for a card that you might not keep for more than a year, get the Ink Plus for its 60,000-point sign-up bonus. But if you want a card that you’ll hang on to for a while, your decision gets much harder. Depending on your spending habits, you might earn more in the long term with the EveryDay Preferred card, plus it’s impossible to beat Amex for its vast selection of transfer partners.

Show Full Article