🏦Banking and Credit Cards

As a business owner, you need a professional banking solution. Today, we’re going to help you find one.

Business Checking Accounts

• A business checking account is a great idea for a multitude of reasons. Many banks have restrictions when it comes to using personal accounts for business transactions. You don’t want to go against your bank’s terms and conditions.

• Business accounts may offer more benefits than a personal account when it comes to running your business.

• Business accounts also often come with higher limits on money transfer services, such as Zelle.

Business Credit Cards

• OK, so first, let’s discuss the elephant in the room — CREDIT. Some people do not believe in opening a credit card and prefer to pay cash or use debit cards. While this is certainly noble, as a business owner who has money going in many directions, you should really consider a rewards credit card.

  • If you cannot 100% commit to paying a credit card IN FULL each month (with the slight exception of the American Express Plum card we describe below), you should not even consider opening a credit card. The benefits gained by earning rewards are nothing compared to the interest rates you’ll pay if you carry a balance.

• For shipping and online advertising, we recommend the Chase Ink Business Preferred Card.

  • You’ll earn 3x the points on shipping and online advertising, up to $150k per year. On other purchases, you earn 1x the points, which is decent. (each point is worth 1.25 cents on “Pay Yourself Back” redemptions, or more when you transfer to travel partners) This really adds up when you have high shipping and online advertising costs.

  • The card comes with a $95 annual fee, but you will make this amount back as long as you are using the card enough. This card is typically issued as a Visa, which is good for purchases at places that are selective on the type of card they accept, such as Costco.

  • The American Express Business Gold Card can also be a good option for those in the AMEX ecosystem, but it carries a higher annual fee and some retailers may not accept American Express. It offers 4x the Membership Rewards points on categories like shipping and advertising.

• The Capital One Spark Cash Card is a card that’s great for all general purchases.

  • It features easy, no fuss 2% cash back on your purchases. You don’t have to worry about complicated categories or how to best redeem your cash back.

  • This card also features a $95 annual fee, but Capital One also offers a Cash Select card with 1.5% back for no annual fee if you’re looking to avoid that.

  • It's worth noting that some users have reported that Capital One reports business cards to your personal credit report. This isn't the case with every bank and is something good to keep in mind. We'll talk a bit more about this below.

• If you need a bit more flexibility with your cash flow, you should check out the Plum Card from American Express.

  • The Plum Card is unique as it gives you the option to pay in full each month or to carry a balance for up to 60 days with no interest charges.

  • If you pay the card in full by your statement closing date, you’ll earn unlimited 1.5% cash back. If you need more time to pay, you can pay the full balance within 60 days without interest as long as you pay your minimum payment by the due date. While you won’t earn cash back in this case, this card can help you to significantly improve your cash flow.

What To Know About Business Cards

• In most cases, and especially when starting out, business cards will pull a guarantee from your personal credit. This means if you have good personal credit, you’ll more than likely be approved for a wide variety of business cards with a high credit limit. If your credit isn’t so good, you might not be able to easily get premium business credit cards. Consider asking a business partner to take care of applying for a card and adding you as an authorized user if you don’t have access to credit.

• While the card WILL pull your personal credit in most cases, it often won’t report to your personal credit unless there are major derogatory marks like missing a payment or being delinquent on your account. This means in most cases the utilization ratio (which is the amount of your credit limit you’re using) won’t be reported to your personal credit.

Personal Banking and Your Business

• As you get started you may use personal banking products as a means of getting your business off the ground. As you grow, however, you may consider looking for products that are tailored to business. Not only will you get better protections, but you may also find better perks meant for business.

• In some circumstances, business loan products, such as credit cards, may not report to your personal credit, unless you miss a payment. This is good if you are looking to earn card signup bonuses or qualify for other personal loans.

• Due to federal law, banks discourage co-mingling personal and business transactions. If banks pick up on you using your personal card for business transactions (or vice versa), they may close your accounts and take your rewards away. This doesn't happen often and we're not trying to scare you, but it's worth keeping in mind.

Our lawyers want you to know: while we're pretty proud of our team here at CommerceNavigator, we aren't acting in an official capacity as your banker, CPA, or attorney. We provide general information for educational purposes, not specific or professional advice. Since every situation is unique, you may want to consult with the appropriate experts for accounting, banking, legal, and business issues.