Are Business Credit Cards Your Best Option?

With the new legislation coming up on February 22 concerning credit cards and regulations, many small business owners are wondering if their business accounts are better or if they should start doing more business using their personal accounts.

If you have been keeping up with the legislation, you know that the new laws are designed to protect consumers against arbitrary rate hikes and other charges. However, these new regulations do not apply to business credit card accounts.

However, Gerri Detweiler with Credit.com, suggests that small business owners use the types of credit cards designed for the purpose with small business in mind. He says relying on your personal accounts could ding your credit and murky the waters in trying to keep your personal expenses and your business expenses separate for tax purposes. But business owners must now decide which is worse: a few dings on their personal credit history or risking the chance of getting sudden rate hikes and more expensive terms that they may not be able to afford.

As of right now, about 41 percent of business owners use a credit card for certain expenses. According to the National Small Business Association, many of them decided it was easier to use their business credit cards rather than getting a small bank loan or opening a line of credit. Now, the NSBA fears that credit card companies are going to increase rates and fees on these small business accounts in order to make up for losing the revenue from the personal accounts.

About 75 percent of small business owners will likely continue to use their business credit cards for their business expenses. They figure they will not be affected by the variable interest rates because they pay their bill every month, according to Samir Kothari, VP of products at BillShrink.com. However, the other 25 percent of business owners will likely switch to personal accounts if they often carry debt and use their credit cards for making payments.

Others are worried that using their personal accounts for business purposes will catch up to them. IN the Truth in Lending Act, consumers are not protected if they use their personal accounts for business purposes.

Owners of seasonal businesses have even more decisions to make about using their personal or business credit cards. Steve Navratil, owner of a lawn care business, often carries a balance on his business cards throughout the winter months since there is not much income. His business posted over $100,000 in sales in 2009, but due to the nature of his business, he cannot pay his business credit accounts off each month during the winter.

Are you making any changes as a small business owner to accommodate the new credit card regulations? Or are you going to continue in business as usual and hope for the best?