Business Credit Cards and Personal Liability
For a new business, the basis for credit card approval usually depends on the business owner’s personal credit history. By carefully reviewing your contract, you can become more aware about the personal liability clause imposed by your bank or business credit card issuer.
Is There A Personal Guarantee on Business Credit Cards?
The moment you sign your business credit card agreement, you become personally responsible for your business account. In case the business fails, you- the business owner is still accountable for all debts charged to your business credit card.
Therefore, your personal credit history can also be affected in case you delay or default with your payments on your business credit card. Yes, your personal credit score can drop if you encounter problems with your business account.
As an entrepreneur, managing your small business credit cards must be done with caution. Be extra careful when distributing supplementary cards to your employees. Monitor your account regularly to ensure that all charges made using your credit card for business are valid expenses.
Can You Avoid Giving A Personal Guarantee?
Is it possible to be released from your personal liability? Yes, it is. If you have been a business credit card holder for at least two years, you can request your bank or credit card issuer to lift the liability clause on your behalf. If you have proven to be a good payer throughout your membership, it should not be difficult to convince your credit card company to grant your request.
Business owners must work on establishing their business credit history as soon as possible. Register your business with Dun & Bradstreet and Experian (business) to ensure that your transactions with credit card companies and lenders would be properly recorded.
Also, make sure that your chosen business credit card reports your payments to the business credit bureaus. Remember that business credit bureaus work separately with credit reporting agencies for consumers.
Separating your business and personal credit history does not mean you should relax on your payment obligations. Bear in mind that all your transactions can still affect your personal and business credit in one way or another. By keeping both your personal and business credit in excellent standing, you can take advantage of your low interest rates when dealing with lenders.