Small Business Owners Have Many Credit Cards, But Are They the Right Ones?

May 30, 2018

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Small business owners have twice as many credit cards as consumers — personal credit cards, that is. This is according to new research from the business credit-monitoring website Nav.com.

Comparing anonymized credit card data from 143,004 of its small business customers and 128,281 of its consumer customers, Nav found that small business owners have 4.78 personal credit cards on average, while consumers have 2.32 credit cards. The average total credit limit for business owners was $35,291 versus $18,401 for consumers.

It makes sense that business owners would need access to more credit than a typical consumer. Using a credit card for business expenses can help improve your cash flow, among other benefits. But the implication of this research is that entrepreneurs are using personal credit cards in lieu of business credit cards for their expenses.

Why a Business Card Makes Sense

Using a personal credit card to fund your business can hurt your personal credit score — particularly if you regularly use up much of your available credit — because it may push your utilization ratio too high. That won’t be a problem if you use a business credit card because once that line of credit is open, it remains separate from your personal credit.

Opening a business credit card also is a good way to separate your business finances from your personal ones. Doing so could make it easier for you to take advantage of tax deductions for ordinary and necessary business expenses.

Finally, you may be able to maximize your credit card rewards by opening a business credit card. A number of business cards, like the Ink Business Cash Credit Card, offer bonus categories not typically found on consumer cards — categories that reward business owners on some of their most frequent spending needs.

Ink Cash, for example, pays 5% back on the first $25,000 spent in combined purchases at office supply stores and on cellular phone, landline, internet and cable TV services each account anniversary year. You’ll also earn 2% cash back on the first $25,000 spent in combined purchases at gas stations and restaurants each account anniversary year, and you’ll get an unlimited 1% cash back on everything else.

Photo by PeopleImages / Getty Images

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