#358: The Pros & Cons of Having a Business Credit Card

Now, I do subscribe to the whole Dave Ramsey not having credit, and he believes he tells people just to flat out don't get credit cards, period. But I don't agree with that because. Hey, everyone, welcome back to the Healthcare Entrepreneur Academy podcast. I'm your host, Jason Duprat, and we are back here for another Tactical Tuesday episode.

And on this episode, I want to talk a little bit about credit cards and whether or not you should be utilizing credit cards for your business and some considerations in terms of cons and pros that you need to think about if you have a credit card for your business. Now, this sort of spawns out of a conversation I had several months back with somebody who had started a business and they had used a business credit card to basically fund its entire startup or most of it. And this person had decided that maybe this isn't really the business that I want to start after basically charging everything on a credit card.

And the thought process was this is a business card, so therefore I'm not personally liable for any of the transactions. And basically this is just a complete write-off. I'm just going to shut down the business and there's nothing that they can do to get their money back because I'm not liable for it and the business is gone. And in theory, that may be a potential valid thought process, but it's completely inaccurate.

So if you have a business credit card, nearly every business credit card that is out there is going to require the officer who opened it up, the corporate officer, to sign a personal guarantee that's going to be written into the language of the contract. And whether or not you read the contract is one thing, but I guarantee you that if they asked you for the name of the officer of the business who is opening up the card and they also collect the social security number of that officer that in that clause, if you were to search it, you would search for the word liability.

But in that document, there's going to be a clause in there that says that the person who opened that account, whose social security number that they took and whose credit they checked in order to open that account is personally liable, even though it's the business's expense. They're both duly liable. So that is not a way to escape credit card debt. That's in the name of your business because you have opened up a business credit card that required a personal guarantee, right?

Makes sense? Now, there are some corporate credit cards. There's a difference between a small business credit card, which is what almost all business credit cards are, and a corporate credit card. A corporate credit card will not hold the person who opened it up accountable.

Only the business is liable for those corporate card expenses. Now, these are much harder to open up. Typically, there are revenue requirements. From what I could gather from doing some online research, most of them have at least a $4 million a year annual revenue, gross revenue requirement.

Plus, some also require a minimum number of authorized users And some even only allow this to be set up by C and S and not LLCs So there a lot more requirements to set up a corporate credit card. They're intended to be used by larger corporations and they're intended to be used by corporations that have a substantial number of cardholders, like maybe 15 or more as per the requirements, officers and directors who are using the company's credit card for traveling or whatever expenses that they have.

So that's the only way to not be held personally liable for your business's credit card, just to clear the air on that. Now, there are some benefits to having a business credit card, and those come in mainly the accumulation of points. Now, I use, and I don't get paid for recommending anything, and I'm not recommending anything. I'm just telling you what I use.

It's the Chase Inc. business. I believe it's the preferred, but the reason I use this one is it is because it offers the most points for a certain high expense category that we have every month, which is paid advertisements. This particular card offers three points for every dollar spent up to $150 per year in dollars spent on the card.

So you can accumulate potentially 450,000 points per year before you max it out. Now, if you aren't really familiar with credit card points, basically how most of them, if you approximate their dollars value, if you were just to do just a cash out on them, which a lot of the cards will let you do a cash out in the terms of just cold, hard cash or a credit to your account or gift cards is another thing that they let you do. But if you just move the decimal over, if you just divide your point value by 100, you'll get a pretty close estimate to what the cash value is or the gift card value is of your points.

For example, let's say that you are spending $10,000 in qualifying expenses on your business credit card, and you get three points for each one of those. Now, a quick word from one of our sponsors. Today's episode is brought to you by the Ivy Therapy Academy. Together with our partner, Casey, a successful Ivy Therapy Clinic owner, we created a comprehensive training program that includes access to and coaching from real-world clinic owners and IV therapy experts.

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Now you have 30,000 points, right? So that works out to be approximately $300 in basically cash value if you were to cash it out. Now, the key here is to make sure that you aren't paying any interest expense on any balance. So you need to be obviously a very financially responsible business owner.

So you need to set up reminders for yourself. Otherwise, they're going to end up charging you more in interest than you actually make in points. So you need to be paying $0 in interest. And the only way to do that is to make sure that you're paying it off before whatever your fine print says.

And usually that's about 30 days. So for me, I have two reminders. So I pay bimonthly the balance in full to make sure I don't ever pay interest. And I'm just accumulating points.

Has there been a time where I've completely forgotten to make one of those payments and I ended up getting dinged with some interest? Yes. But the key to this whole process is to make sure that you don't let that happen to you with reminders. So instead of having one reminder, now I always set up two reminders.

And since then, I haven't been hit with any interest charges. And so now we've accumulated just a little shy of 700,000 credit card points on our business card. Now, the beauty of that is you can use it for travel. And if the cash value on that is about $7,000, but if you use it for travel, oftentimes you can get reduced price flights.

Whereas the number of points that you use is actually substantially less than you would pay cash for if you equal those out. And so there's a lot of benefits. If you want to just do some gift card shopping, Chase lets you just buy gift cards for pretty much any place that's in demand, any major chain. You can use it for, like I said, travel, for booking cruises, for booking airline tickets, for hotels, the list just goes on and on.

And so if you're spending the money anyways, why not just spend it wisely? Now you do have, like for this card, for example, I have a $95 annual fee. You have to keep that in mind. There is one expense there.

As long as you're not paying any interest, that would be your only expense, $95 a year. But here's the caveat. They give you 100,000 bonus points for spending your first $15,000 in the first, I think, 90 days or something. So you're like pretty much 10 years of annual fees have already been reimbursed to you up front if you get that first hundred thousand dollar bonus of points.

So it essentially doesn't cost you anything as long as you're not paying interest. But where they get people, obviously, it are those who miss their payments, who forget and let that balance accumulate and don't pay it off in full. So if you a responsible business owner if you very good with your finances if you very organized and you don miss your payments there a lot of benefits to this because you spending the revenue anyways Why not get some extra rewards out of it So that my take on it Now I do subscribe to the whole Dave Ramsey not having credit, and he believes, he tells people just to flat out don't get credit cards, period.

But I don't agree with that because there are benefits, and if you're responsible, and you've proven that with a great track record of financial and fiscal responsibility, then go for it. Get the extra rewards. In just a couple of years, we earned, and actually it hasn't even been a couple of years because we didn't use the credit card initially. It was something that we just discovered through one of our marketing agencies because they run, sometimes some of these agencies will run all of their clients' ad spend through their business card and then get reimbursed from their clients as a way to skyrocket their accumulation of bonus points.

So hopefully you guys have learned something new about business credit cards and using them wisely and the difference between business credit cards and corporate credit cards. And the fact that if you have a business card and they collected your social security number when you opened it, you are personally liable. So don't get confused on that. Don't start to rack up your credit card thinking that you can just walk away from it and or your business and not have any repercussions, the banks are way smarter than most of us.

And certainly they are not going to let people just screw them over like that. Be wise, be smart, be honest with your business transactions. And just because it's a big corporation doesn't really give you the right to try and screw them over anyways, in my opinion. Hopefully you guys are taking advantage of things like this if you are wise with your money and very disciplined with your spending and making sure that you pay everything on time because there are some great benefits to it.

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