Home > 2014 > Credit Cards

Business Credit Cards: What’s the Catch?

Advertiser Disclosure Comments 0 Comments

It is not unusual to see a credit card offered in versions for both consumers and business users. In addition, there are many business credit cards that offer competitive rewards and benefits. Therefore, some sophisticated credit card users will carry both business and personal credit cards for everyday use.

However, business credit cards can be so appealing that some cardholders are left to wonder: What’s that catch? Let’s take a look.

1. They’re Exempt From Many CARD Act Protections

The CARD Act was one of the most far-reaching pieces of consumer protection legislation to ever affect the credit card industry. Yet because those protections were meant to help consumers, lawmakers chose to exempt credit cards used by businesses.

For example, the CARD Act prohibits double-cycle billing, which is when card issuers calculate interest based on the previous two billing cycles, often including transactions that were already paid. Other CARD Act provisions include banning interest rate increases based on information from other lines of credit, and unfair payment allocation that credited payments to the balance with the lowest interest rate first. Thankfully, many business credit cards voluntarily comply with some of the CARD Act provisions enforced on consumer cards, but business card users need to closely examine their card’s terms and conditions.

2. Business Debt Appears on Your Personal Credit History

Even though you applied for a credit card in your business’s name, and used its employer ID number, any debt incurred will still appear on your personal credit report. If the debt is substantial, it could increase your debt utilization ratio and hurt your credit score. This is why it’s important to regularly check your credit reports for accuracy and monitor your credit scores to see how your habits are affecting your credit. You can check your credit reports for free every year from each of the three major credit reporting agencies, and Credit.com gives you two free credit scores, updated monthly, with an explanation of what factors are influencing them, and a plan to help you build credit.

3. The Primary Account Holder Is Always Responsible for Paying

If you use a business card to charge expenses that are to be reimbursed by an employer or a client, the debt is still yours. If your client fails to reimburse you, or your employer goes out of business, you will be stuck with the debt and any default will severely damage your credit.

Likewise, if you are a small business owner, and you make an employee an authorized cardholder, you will be personally responsible for paying all of his or her charges. Should a disgruntled employee use his or her card to make personal charges, you must first pay the bank and then pursue the employee in order to try to recover any money that you feel you are owed.

4. They Can Be Expensive

Most business credit cards are rewards cards that offer valuable features and benefits, but also have substantial annual fees. These products can make sense for frequent business travelers, but some small business owners who use these cards are may be incurring unnecessary expenses.

5. The Primary Account Holder Earns the Rewards

Perhaps you have been made an authorized cardholder of a business credit card account. Any points, miles or cash back rewards that are earned will be credited to the primary account holder, not the authorized cardholder. Some employees who are required to use their boss’s business card feel that they are being unfairly deprived of the rewards that they could have earned had they used their own personal credit card.

More on Credit Cards:

Image: LDProd

Comments on articles and responses to those comments are not provided or commissioned by a bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by a bank advertiser. It is not a bank advertiser's responsibility to ensure all posts and/or questions are answered.

Please note that our comments are moderated, so it may take a little time before you see them on the page. Thanks for your patience.

Certain credit cards and other financial products mentioned in this and other articles on Credit.com News & Advice may also be offered through Credit.com product pages, and Credit.com will be compensated if our users apply for and ultimately sign up for any of these cards or products. However, this relationship does not result in any preferential editorial treatment.

Hello, Reader!

Thanks for checking out Credit.com. We hope you find the site and the journalism we produce useful. We wanted to take some time to tell you a bit about ourselves.

Our People

The Credit.com editorial team is staffed by a team of editors and reporters, each with many years of financial reporting experience. We’ve worked for places like the New York Times, American Banker, Frontline, TheStreet.com, Business Insider, ABC News, NBC News, CNBC and many others. We also employ a few freelancers and more than 50 contributors (these are typically subject matter experts from the worlds of finance, academia, politics, business and elsewhere).

Our Reporting

We take great pains to ensure that the articles, video and graphics you see on Credit.com are thoroughly reported and fact-checked. Each story is read by two separate editors, and we adhere to the highest editorial standards. We’re not perfect, however, and if you see something that you think is wrong, please email us at editorial team [at] credit [dot] com,

The Credit.com editorial team is committed to providing our readers and viewers with sound, well-reported and understandable information designed to inform and empower. We won’t tell you what to do. We will, however, do our best to explain the consequences of various actions, thereby arming you with the information you need to make decisions that are in your best interests. We also write about things relating to money and finance we think are interesting and want to share.

In addition to appearing on Credit.com, our articles are syndicated to dozens of other news sites. We have more than 100 partners, including MSN, ABC News, CBS News, Yahoo, Marketwatch, Scripps, Money Magazine and many others. This network operates similarly to the Associated Press or Reuters, except we focus almost exclusively on issues relating to personal finance. These are not advertorial or paid placements, rather we provide these articles to our partners in most cases for free. These relationships create more awareness of Credit.com in general and they result in more traffic to us as well.

Our Business Model

Credit.com’s journalism is largely supported by an e-commerce business model. Rather than rely on revenue from display ad impressions, Credit.com maintains a financial marketplace separate from its editorial pages. When someone navigates to those pages, and applies for a credit card, for example, Credit.com will get paid what is essentially a finder’s fee if that person ends up getting the card. That doesn’t mean, however, that our editorial decisions are informed by the products available in our marketplace. The editorial team chooses what to write about and how to write about it independently of the decisions and priorities of the business side of the company. In fact, we maintain a strict and important firewall between the editorial and business departments. Our mission as journalists is to serve the reader, not the advertiser. In that sense, we are no different from any other news organization that is supported by ad revenue.

Visitors to Credit.com are also able to register for a free Credit.com account, which gives them access to a tool called The Credit Report Card. This tool provides users with two free credit scores and a breakdown of the information in their Experian credit report, updated twice monthly. Again, this tool is entirely free, and we mention that frequently in our articles, because we think that it’s a good thing for users to have access to data like this. Separate from its educational value, there is also a business angle to the Credit Report Card. Registered users can be matched with products and services for which they are most likely to qualify. In other words, if you register and you find that your credit is less than stellar, Credit.com won’t recommend a high-end platinum credit card that requires an excellent credit score You’d likely get rejected, and that’s no good for you or Credit.com. You’d be no closer to getting a product you need, there’d be a wasted inquiry on your credit report, and Credit.com wouldn’t get paid. These are essentially what are commonly referred to as "targeted ads" in the world of the Internet. Despite all of this, however, even if you never apply for any product, the Credit Report Card will remain free, and none of this will impact how the editorial team reports on credit and credit scores.

Our Owners

Credit.com is owned by Progrexion Holdings Inc. which is the owner and administrator of a number of business related to credit and credit repair, including CreditRepair.com, and eFolks. In addition, Progrexion also provides services to Lexington Law Firm as a third party provider. Despite being owned by Progrexion, it is not the role of the Credit.com editorial team to advocate the use of the company’s other services. In articles, reporters may mention credit repair as an option, for example, but we’ll also be sure to note the various alternatives to that service. Furthermore, you may see ads for credit repair services on Credit.com, but the editorial team isn’t responsible for the creation or implementation of those ads, anymore than reporters for the New York Times or Washington Post are responsible for the ads on their sites.

Your Stories

Lastly, much of what we do is informed by our own experiences as well as the experiences of our readers. We want to tell your stories if you’re interested in sharing them. Please email us at story ideas [at] credit [dot] com with ideas or visit us on Facebook or Twitter.

Thanks for stopping by.

- The Credit.com Editorial Team