DEFINITION of 'Business Credit Card'

A credit card intended for use by a business rather than for an individual’s personal use. Business credit cards are available to businesses of all sizes, including sole proprietorships, and they don’t show up on the cardholder’s individual credit reports or affect an individual's credit scores. If a business cannot repay its credit card bills, however, the business owner may be held personally liable for the debt, depending on the terms of the credit card agreement.

BREAKING DOWN 'Business Credit Card'

Business credit cards usually have unique benefits designed to entice business customers. These benefits may be different from the benefits offered to individual customers. For example, some business credit cards offer cash back on purchases at stores where businesses are likely to frequent, such as office supply stores. Business credit cards also tend to offer larger sign-up bonuses than individual credit cards in anticipation of high business spending.

Travel perks are another common benefit, since many businesses have significant travel expenses. A business credit card might entitle the holder to use an airline’s VIP lounge at airports or receive discounts on hotel stays during business travel. Business credit cards also sometimes offer more flexible repayment terms designed to appeal specifically to businesses, whose cash flow may be irregular.

In addition to offering the usual conveniences associated with credit cards, business credit cards help small businesses in particular to keep business spending separate from personal spending. This separation can be helpful for accounting and tax purposes. They also provide an easy way for employees to make purchases and for businesses to monitor employees’ business purchases.

Businesses that need to borrow money for more than the grace period provided by credit cards should consider other sources of financing. Credit cards are typically an expensive financing option compared with other types of loans, such as bank loans and lines of credit. In particular, a secured bank loan will likely have a lower interest rate than a credit card, because the secured loan has collateral that the bank can repossess and sell if the business defaults. Credit card debt is unsecured, meaning that it has no collateral and leaves the creditor with little recourse.

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