Small Business Credit Card Rates Rising

According to a recent article posted on businessweek.com, credit card rates for small business cards are on the rise. Thanks to the bad economy and higher loss rates, issuers have been raising rates.

According to data from BillShrink, the APR on 33 small business credit cards went up from 11% last August to 12.3% in March 2010. While rates have gone up for consumer cards as well, some of that rise is said to be due to the CARD Act reforms passed last year. Those new regulations don't cover small business cards however.

If the government decides to extend credit card reform to cover small business cards, expect lower credit lines, and generous rewards, but with lower fees and less rate changes and penalties. Small business card purchases are still seen as a growth market in the industry and the so issuers are competing for new customers.

Most of the increase in interest rates is likely due to the increased risk credit card lenders take when the economy is suffering. The rates are projected to continue their upward trend according to Ben Woolsey an analyst at creditcards.com. In regards to credit card interest rates he says, “It’s going to keep edging upward a bit, because credit losses aren’t going to improve for the banks until unemployment heads down.”

Entrepreneurs Benefit by Using a Business Credit Card

Today, entrepreneurs have a vast array of business credit cards and options to choose from, yet only 40% of the 2/3's of small businesses take advantage of benefits by using a business credit card. It's imperative that businesses account for each expense, whether it's for quarterly inventory, tax purposes, or expense reports. Here are just a few ways entrepreneurs can benefit through the use of a business credit card.

A monthly itemized statement is provided that makes it easy to track expenses. With this, the business isn't doing a last minute scramble, hunting down receipts and expense reports. Using a business credit card also gives the entrepreneur the opportunity to quickly build their business's credit. This is especially beneficial when a need arises to apply with a local lender for a line of credit for inventory or larger office space.

Monitoring employee purchases is no longer a dreaded hassle. Since there are usually just a few designated employees with purchasing privileges, tracking is now simplified and removes the time-waster of filling out expense reports. It's still a wise practice to require employees keep and submit their receipts.

Put rewards to good use for business travel for seminars & meetings, office supplies, and discounts on services such as internet or phone.

When applying for a business credit card, entrepreneurs should apply with the financial institution they personally deal with and take advantage of their existing relationship.

Take advantage of the 21-day grace period for payments, offered by most business credit card companies. This is important when an entrepreneur is building initial cash flow.

Pay card bills on time to build your business's good credit. Also, consider paying those bills online, thus avoiding the ever rising cost of stamps and post office hours and lines.

When entrepreneurs fully take advantage of the many benefits of using a business credit card, their financial management stress lowers significantly. Using a business credit card to track expenses, obtain useful rewards, and establish good business credit are just the immediate perks with many others to follow.

Credit Cards Make Financial Management Easier for Small Businesses

Small business owners often complain about the time consuming task of keeping track of their finances and purchases for tax time. It’s imperative that a business can account for each of their purchases – both for tax purposes and for strong management of their business.Using a business credit card can eliminate some of the time spent categorizing and tracking each of your expenses and purchases.

When you use a single credit card for all business purchases, your monthly credit card statement will give you a record of all of your expenses by the month, broken down by individual purchase. You can often get a year-end statement from the credit card company as well, with purchases already categorized by type and by month which will make your job (or your accountant’s job) of balancing your books much easier.For businesses that have a key employee or two, using business credit cards allows you to keep a close eye on the items they’re purchasing or paying for on behalf of your business. You can issue your key employees a card in their name, and then review the purchases made to each individual card on a monthly basis.Additionally, many credit cards designed for business use offer discounts for businesses – from office supplies to travel discounts to merchandise discounts or rewards. Select a card based on the type of purchases you need to make most often for the most benefits.

Caution: Small Business Credit Cards Mean Personal Liability

As small business loans have dried up, more entrepreneurs are turning to small business credit cards to fund their ventures. Though this is a common approach, you should be careful which cards you sign up for.

Banks are now offering new cards labeled specifically for small business use. However, if the business doesn’t work out and the credit card bill goes into default, banks have a back-up source of funds - you, the cardholder.

One advantage of running a small business is that, if set up correctly, the business’s assets and liabilities are separate from your own. But with this new generation of small business credit cards, banks can come after your personal assets if the bill goes unpaid.

It’s worth noting that the new Credit Card Holder Bill of Rights doesn’t specifically protect entrepreneurs or small businesses. Experts recommend avoiding these small business cards altogether and using personal credit cards to pay business start-up costs. Then, pay the credit card bill from the business’s money.

Chase is planning to launch at least four entrepreneur-targeted cards, and other banks will undoubtedly follow suit. Weigh all of your options carefully when deciding how to fund your small business.