How business cards can impact your bottom line

Careful: They lack the protections offered by consumer cards

Commercials advertising the wonders of business credit cards often showcase scrappy and loveable business owners who tout their card's generous credit limits, cutting-edge budgeting tools and considerable flexibility. The implication is that their card allowed them to build a thriving business and create their own American dream. What they don't share is the card's fine print -- the complicated rules and limited protections that, if misunderstood or used improperly, can sour the most optimistic entrepreneur's mood.

When the Credit CARD Act was passed in 2009, it required credit card companies to change their practices in a variety of ways that generally made cards less expensive -- and confusing -- for consumers. But the array of new regulations, which prevented sneaky practices such as double-cycle billing and tamped down runaway interest rates, don't apply to business credit cards.

Small business credit cards come roaring back; compare to find the best

That can mean trouble for the 59 percent of small businesses that say they use a business credit card, according to a 2012 survey from the NFIB. They must be more vigilant than the average consumer to make sure that they're not slapped with extra fees or getting unexpected interest rate hikes, says Molly Brogan, spokeswoman for the National Small Business Association. "You've got to read through the terms, look through your statement and check the due date every single time," she says.

The fine print in your terms of agreement might show that you're paying far more than you would if the charges had gone on your personal credit card. See Business card comparison chart for details.

 For example:

  • U.S. Bank, Citi and Discover offer business cards with terms that allow the companies to apply payments to balances with the lowest APRs first (often from generous introductory interest rates), while higher APR balances will continue to rack up costs. That billing practices is banned for personal cards.
  • Chase has rules for some of its business cards that state that anyone who receives a default rate (often as the result of late payments) may have the rate applied indefinitely. For personal card users, such default rates can be "cured" with six month's worth of on-time payments.
  • Citi has a universal default clause for its business cards, which means it can use information from other accounts to raise rates at any time, for any reason. The CARD Act, for the most part, does not allow card companies to raise rates for problems unrelated to cardholder's account.

While it may seem unfair that business owners are subject to different rules than individual consumers, Nessa Feddis, spokeswoman for the American Bankers Association trade group, notes that they're two distinctly different types of customers. Consumers might not have vast amounts of financial education, but business owners must have more than rudimentary knowledge of the subject. "Congress assumes that people in business have a certain level of sophistication and business acumen," she says.

For Brogan, the financial sophistication of a given credit card user shouldn't make a difference. "I think the rules [from the CARD Act] should apply to everybody," she says. "It's true that small businesses can be riskier, but at the end of the day, what card companies are [typically] using to either approve or deny a credit card is the owner's personal credit score. And it's that individual person who's on the hook."

That said, there is an array of other services that business owners use with their credit cards that simply don't apply to individual users. Many business owners, for example, take advantage of services such as tailored spending reports, extra cards for employees with individual spending limits and custom payment terms.

Kevan Chapman, a spokesman for NFIB, adds that businesses often have more significant needs for credit as well. "Small business owners who use business cards tend to be larger employers and tend to charge significantly more to their card than users of personal cards," he says.

Weigh personal vs. business card
For solo small businesses, however, the protections of a personal card may outweigh the perks of a business card. Data released by the NFIB in January 2012 suggests as much: Businesses that report using personal credit cards jumped from 42 percent in 2009 to 49 percent in 2011, while the use of business cards has dropped from 64 percent in 2009 to 59 percent in 2011.

In many cases, the credit card companies are making changes so that business card terms more closely mirror those of personal cards. Discover spokesman Robert Weiss says the company's business credit cards offer a number of protections. "Our business cards are compliant in several areas within the CARD Act, including cancellation, reviewing policies after six months, on-time payments, and ability to pay," he says.

Chase's Ink cards also have an array of protections and improvements, including fixed statement and payment due dates, no double-cycle billing and no universal default clauses. "Ink from Chase voluntarily made changes to give small business customers more financial control," says Rob Tacey, Chase spokesman.

Of course, all of this is moot for the business owner who stays on top of bills and uses a card only for convenience -- and this, it turns out, describes many of them, says Chapman. "Most small businesses do not carry a balance on their cards, [and pay] them off in full each month."

Compare small business credit cards

Different businesses have different needs. There is no one-size-fits-all credit card, which is why you should comparison shop.  Whether you need low interest rates or want generous perks, there's probably a card that's tailored just for you.

Name of card Annual fee
APR Rewards
Capital One Spark Cash
$59 after the first year 13.9% 2% cash back on all purchases, plus up to $150 in introductory bonuses
U.S. Bank FlexPerks Business Cash Rewards Visa No fee for any year that a purchase is made on the card; otherwise $25 11.99% to 17.99% 3% cash rewards on cellular, gas and office supply store purchases; 1% on everything else; 25% annual bonus of prior year's cash rewards; 0 percent introductory APR for 6 to 9 months on purchases
Chase Ink Cash
None 13.24% $250 cash back after $5,000 spending in first three months; 5% cash back on wireless and telecommunications services, cable and satellite, office supply stores, and wholesale distributors; 2% for gas stations and dining establishments; 1% for everything else; some maximums apply
Starwood Preferred Guest Business from American Express Open
$65 after the first year 15.24% to 19.2% 10,000 Starpoints after first purchase, and 15,000 after spending $5,000 in six months; savings with FedEx and Hertz; 2 points per $1 spent at a Starwood hotel, 1 point per $1 everywhere else
Chase Ink Bold
$95 after first year Variable 50,000 bonus points after spending $5,000 in first 3 months; 5 points for every $1 spent on business expenses including wireless and telephone services, cable and satellite services, and office supply stores; 2 points at gas stations, hotels, and motels; 1 point everywhere else; complimentary airport lounge access
U.S. Bank FlexPerks Business Travel Rewards Visa
No annual fee if users spend at least $24,000 on the card; otherwise $55 for primary cardholder and $10 for each authorized user 11.99% to 17.99% 10,000 points after $500 in net purchases; $25 airline allowance with each award ticket. Double points on gas, office supplies or airline purchases each month, whichever you spend most on; double points on cellphone service; 1 point for everything else
American Express Business Platinum $450 None; must be paid in full each month 25,000 Membership Rewards points after spending $5,000 in the first 3 months; complimentary access to airport clubs; access to Regus business lounges; savings from businesses including FedEx, Hertz and others
CitiBusiness AAdvantage Visa $75 after the first year 15.24%
30,000 American Airlines AAdvantage miles after $750 in purchases in the first four months; an additional 10,000 miles after $5,000 in purchases in 12 months; $1 in statement credits for every $1 spent on eligible American Airlines purchases, up to $100 in the first year; 2 miles for every $1 on American Airlines purchase, 1 point for everything else
Bank of America Platinum Visa Business or  Platinum Plus for Business MasterCard None 9.24% to 20.24%
SunTrust Business None 8.24% to 12.24% Up to 3% on office supplies and fuel purchases and up to 1% on everything else
Capital One Spark Select Business None 9.9% to 19.9% One mile per dollar on all purchases
American Express Blue for Business None
11.24% to 19.24% Introductory APR of 0% during the first 12 months; 10,000 bonus points after your first purchase; 1 point per $1 spent; annual relationship bonus of up to 30% more points each year; discounts on businesses including FedEx and Hertz
Discover Business None 12.99% to 19.99% 5% cash back on the first $2,000 in office supplies and 2% on first $2,000 in gas each year; 1% cash back on all other purchases
CitiBusiness World MasterCard
None 13.24% 0% introductory APR for 6 months; 15,000 points after $1,000 in purchases in the first 3 months; 3  points for every $1 spent on office supplies and professional services such as tax preparation, bookkeeping, and legal services; 1 point for all other purchases
Wells Fargo Business Platinum None
Prime plus 5.99% to 14.99%
None (unless paying $50 annual fee for rewards program)
Chase Ink Classic
None 13.24% 0% introductory APR for up to 6 months; 25,000 bonus points with $5,000 purchases in the first three months; 5 points for every $1 for cable and satellite, office supply stores, wireless/telecommunications, office supply stores, and wholesale distributors; 2 points at lodging establishments, travel agencies, and gas stations
SunTrust World for Business
None 8.24% to 12.24% Up to 3% on office supplies and fuel purchases and up to 1% on everything else
American Express Plum
$185 after the first year None; all charges must be made monthly (with the exception of deferred payments)
1.5% discount when paying within 10 days of statement closing date; deferred payment for up to 2 months; built-in partner savings at hotel, shipping, tech, supplies, and travel services
Chase GM Business
None 13.24% to 20.24% 5% earnings at authorized Chevrolet, Buick, GMC or Cadillac dealers on GM parts, accessories, and service; 3% earnings on fuel, office supplies, and restaurants; 1% on everything else; $500 statement credit when purchasing or leasing an eligible new vehicle

See related:  Comparison shop for business credit cards

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Updated: 07-17-2018