If you recently became a business owner, you’re probably looking to introduce some novelties into your company, such as businesses cards. Since personal and business cards aren’t the same, it’s highly recommended to open a separate account to track all your finances. That is when you’ll be faced with two options – credit and debit cards. Choosing between the two might be challenging if you’re unfamiliar with the features credit and debit cards bring. They share some similarities since they’re used for in-store and online purchases, including:

  • 16-digit card number;
  • Expiration date;
  • Magnetic strip;
  • EMV chip.

Nevertheless, they come with some unique features, too. We’ve decided to tackle these differences and tell you about credit and debit cards for businesses.

Business credit cards

Banks and other financial institutions issue business credit cards, giving you a credit limit according to your credit score. They charge interest if you don’t repay the balance in full and on time every billing cycle. For example, such credit cards are – Chase Ink (3 Chase Ink Cards Compare), and Blue Business Cash.

ProsCons
Numerous small business owners choose business credit cards as they have plenty of advantages.Business credit cards come with certain drawbacks, too.
Business credit: Using your credit card responsibly means building business credit. As a result, you can become eligible for various loans your company might need for growth in the future.
Credit card rewards: Some banks and financial institutions allow you to earn rewards on eligible business purchases. For example, a 2% cashback credit can make an enormous difference for companies struggling with finances.
Cash flow management: Deciding to pay off the balance in one go or carrying it with interest makes it easy to manage your business’s cash flow.
Interest rates: Carrying a balance isn’t that easy on a  business credit card, so people typically pay higher interest rates.
Numerous fees: These cards have annual fees, employee card fees, late payment fees, returned payment fees, and plenty of other costs that you probably didn’t calculate.
Overspending: Since credit cards let you borrow funds, you can easily spend more money than your business can afford.
Less protection than personal credit cards: There are no fraud-protection measures like credit freeze, and business owners must cover transaction fees and potential chargeback costs.

Business debit cards

Debit cards rely only on funds available in a cardholder’s business checking account, without the possibility of receiving a loan from a bank. For example, such debit cards are – Novo Debit Card, Nearside Debit card, or NorthOne Debit Card.

ProsCons
Business debit cards come with key benefits business owners can enjoy.Even debit cards aren’t perfect. Here are their significant drawbacks.
Difficult to overspend: Your debit card will be declined when you spend the money on your account. Therefore, spending more than you can afford is impossible with debit cards, and you can’t bury your business in debt.
No interest: No credit also means no interest charges. Because you can’t loan money from your bank, you also can’t pay interest fees. As a result, you can save significant amounts of money.
Fewer fees: Debit cards don’t come with the countless fees associated with credit cards. For instance, you’ll never face a late payment fee when using a debit card.
No credit access: Although access to credit can lead to potential debt, it’s also a flexible solution that allows businesses to borrow money when they need it and pay off the balance when they don’t. However, debit cards don’t offer this type of flexibility to their users.
No business credit: Inability to borrow money comes with another disadvantage, which is building business credit. Using debit cards won’t improve your credit score or help you qualify for a loan or a credit card.
No rewards: While some card issuers offer reward points for debit cardholders, that’s not typically the practice. Therefore, you can’t count on cashback and similar perks.
Fraud risk: Debit card transactions process quickly, as only available funds are used. Although that has its advantages, it puts debit cardholders at a higher risk of fraud. Additionally, it takes card issuers a longer time to detect fraudulent activity.

Frequently Asked Questions

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