Industry
Part of Why a business credit card is usually lent to a person, not a company
The five structural axes of a business credit card, liability first
Five structural axes for judging a business credit card: liability, repayment, security, reporting and control, with rewards weighed last, not first.
Cards look more alike than they are. Underneath the marketing, a handful of structural differences decide which one suits a business, and none of them is the headline offer.
No issuer, no product and no rate appears here. What follows is the anatomy, so you can read any two sets of terms against each other.
What to take away
- Sort on liability first. It changes who is exposed and it is rarely on the front page.
- Charge and revolving accounts are different instruments with the same shape, and confusing them is expensive.
- The rewards comparison only means something after the liability and carrying questions are settled.
The five axes that matter
The two ends
- Liability
- The business alone, or you personally as well
- Repayment
- Balance cleared each cycle, or carried
- Security
- Unsecured, or backed by a deposit or asset
- Reporting
- To a business bureau, to a personal file, to both, or to neither
- Control
- One holder, or several cards with limits and visibility
Why it changes your choice
- Liability
- Decides who pays if the business cannot
- Repayment
- Decides whether cost of carrying or the fee dominates
- Security
- Decides access when the file is thin, and what cash is tied up
- Reporting
- Decides what record the account builds
- Control
- Decides how much administration it costs you
Read any offer against those five before looking at anything else.
Five axes of card choice
Axis
- Liability
- Business alone
- Repayment
- Cleared each cycle
- Security
- Unsecured
- Reporting
- Business bureau
- Control
- One holder
One end
- Liability
- You personally too
- Repayment
- Carried balance
- Security
- Deposit or asset
- Reporting
- Personal file, both, neither
- Control
- Several cards, limits
Other end
- Liability
- Repayment
- Security
- Reporting
- Control
Liability, first
A card issued to a business can still carry your personal guarantee, and often does. The two questions are separate: whose name is on the account, and who is liable if it is not paid.
Get both answers in writing before signing. What the guarantee covers, and what survives closing the account, is the part to read slowly. The wider version of this question is in credit cards.
Charge against revolving
A charge arrangement expects the balance in full each cycle. A revolving
Charge or revolving?
Do you clear the balance every cycle?
charge structure usually cheaper
charge is the wrong instrument
arrangement lets you carry it and prices that.
If you always clear, the charge structure is usually cheaper and the discipline is enforced rather than chosen. If you sometimes carry, a charge arrangement can be the wrong instrument entirely, because the consequence of not clearing is not a rate, it is a problem.
Which regime you are actually in is answered by your last twelve statements rather than by your intentions, and the cost consequences are worked through in credit cards cost.
Secured against unsecured
Security buys access when there is no file to lend against. It costs you the
use of whatever is pledged, which is a real cost that never appears on a statement. The full accounting is in secured business credit.
The thing to establish at the outset is what would have to be true for the security to be released, because that is the difference between a stage and a permanent arrangement.
Where it reports
An account can report to a business bureau, to your personal file, to both, or to nothing at all. This is not visible from the product and it is not implied by whose name is on the card.
Ask, in writing, before opening. An account reporting only to your personal file is building a personal record with business spending, which may be fine and is rarely what the owner intended. The mechanics are in tradelines.
Rewards, last
Rewards are a percentage of spending. Carrying cost is a percentage of debt over time, and the second compounds. So a card chosen on rewards while carrying a balance is being chosen on the smaller number.
Compare rewards against your own last year of spending, by category, counting only what you would genuinely redeem. A benefit attached to something you do not buy is worth nothing whatever its stated value. Most credit cards mistakes start right here, valuing a benefit you will never redeem.
For a plain public overview of how card terms are structured and what to look for in them, the CFPB's credit cards section is written for consumers and the anatomy carries over. The FTC's credit and finance guidance covers how such offers are supposed to be presented to businesses.
Common questions
Is a business card always better than a personal one for business spending?
Not automatically. It is better for keeping the business separate, which matters for reasons beyond credit. Whether it builds a business record depends on where it reports, which is a separate question you have to ask.
How many cards should a business hold?
As few as do the job. Each one is an agreement to read, a fee to track and an exposure to remember, and a second card earns its place by solving something the first does not.
Do multiple applications hurt?
On the consumer side there is published guidance about inquiries. On the business side the answer sits with each bureau and each issuer, and nobody outside them can give you a number. Space applications sensibly and ask the issuer what it looks at.
