For some consumers, the terms “business credit card account” and “credit card” are one and the same. However, although both cards are used as business financing tools, there are differences between the two.
If you are a business owner, understanding more about these two cards is important. What are the differences between charge cards and business charge cards?
Differences between the Two
Just like a personal credit card account, a small business credit card can also be used to make purchases which you can pay off on your due date. As a charge card account holder, you have the option to pay off your balance in full or pay only the minimum required by your issuer.
As much as possible, it is recommended to pay your balance in full to avoid paying the additional interest rate. Consequently, if you choose to carry over your balance for the next month, you’ll automatically be charged with the additional interest charge.
A credit card account is different. With a charge card account, the interest rate or APR doesn’t apply at all. However, carrying over your balances to the next billing cycle is also not an option. Instead, you are obligated to completely pay off your charges on your scheduled due date of payment.
Which One is For You?
As an entrepreneur, which card should you get? Your decision should depend on your spending style and business needs. For instance, if you want to put a limit on your monthly spending, a credit card account may be the more practical choice.
Since you can’t carry over balances from month to month, you need to be constantly aware of your charges. If you know that you can’t afford to pay off that amount by the end of the month, you’ll see to it that your charges won’t exceed your limit.
On the other hand, if you want the flexibility of not having to completely pay off your balances each month, then a business credit card account is the one to get. Aside from these, you can get a business charge card with reward programs that give you the opportunity to earn incentives from your charge card account spending.
Take note that despite the flexibility and convenience of business credit cards, you should not take your payment obligations lightly. Failing to pay your balances on time means you’ll also get penalized with expensive late fees. Add to this, if you’re in the habit of paying only the minimum due on your credit card, not only do you incur high interest rates on your account but you are also putting yourself at greater risk of getting stuck in debt.
If you’ve chosen to apply for a business charge card, be prepared for the responsibilities that come with it. Remember, whether you prefer to get a charge card or a business credit card, the way you handle your account will have a direct effect on how you build your business credit. Timeliness of payment is equally important on using both cards.
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Tags: charge cards, credit card debt, credit cards, Finance, personal finance
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