Business credit cards work quite similarly to personal credit cards; that is to say, you use the card to make purchases, even take out cash and then every month you will make payments on it. If you don't pay the full amount monthly, then you'll be facing interest charges on the total used. By obtaining a high limit credit card, you increase the amount of purchasing power your business has. So what are some of the reasons for applying for a high limit business credit card, among others consider the following:
- It may be more money than you currently can use on a personal card.
- By getting more credit on a higher limit card you have a greater ability to build business credit by showing that you can use this card responsibly.
- With this high limit card, you have a built-in recording system for purchases made by the company.
- Many such cards have reward programs attached which allow you to take advantage of some valuable benefits.
When Applying for High Limit Credit Cards
Of course, to start you want to research the options available. Just as with a personal credit card, each card comes with its terms, its rates and its rewards. You thus want to do your homework and seek out the best high limit business card for your company.
You can start by approaching a bank with whom you currently work—whether personally or the one you use for company purposes. Often banks will offer high limit credit cards to their long term customers who are in good standing. And even if they don't give you as high a limit as you'd like, there is the possibility of checking each year to see if a limit increase is possible, especially if you've been diligent about your monthly credit card payments.
Improving Your Credit
When you do go to apply for a new high limit business card, they will likely check your credit score. Generally speaking, the issuance of this card is dependent on your guarantee and so this is why your credit history does come into play. What happens if that credit history is not where it needs to be…You might want to try some rebuilding strategies in terms of your credit before going in to apply for a high limit card.
Some things you can do to work on that credit score:
- Make on-time payments for all open accounts.
- Close inactive accounts.
- Try not to have too many credit inquiries before applying.
- Pay off smaller debts.
If you can get rid of outstanding debt this is probably going to have the most impact on your credit score. If when looking at your application they see several open accounts and a huge amount of debt, they'll be more hesitant to issue you a high limit business credit card.
Pros and Cons of Having a High Limit
The Pros -
Rewards: In almost every case, a high limit business credit card will offer some sort of rewards program. So from travel miles to cashback, to 0 percent introductory periods, the options for benefits are extensive. You need to research the card, see what benefits would be most useful for your company and then consider the other aspects of that particular high limit card. Some, for example, will even offer cell phone discounts if you use the card to pay the company phone bill. Which reward will benefit you?
No deposit: Often when going for a business loan you'll be required to put down a deposit or offer up collateral to back the loan. With a high limit card, this is not the case. So you get purchasing power, you can take out cash, and yet you don't have to have a substantial down payment to get this.
Access to Cash: Most high limit cards will let you take out cash using a PIN. Let's say there is an emergency and your business needs cash on handfast—with your card you gain immediate access to the money required.
Online transactions: Versus a bank checking account or paying cash, with a high limit card making online purchases is much easier, more secure and more efficient for your company.
The Cons -
Fees: On some of these high limit cards especially, there can be annual fees associated. So carefully weigh the fees against the rewards that you may be getting. Make a smart decision.
Limited options: If your credit score is subpar or less than stellar than your options may be a bit more limited. If your business does need access to a lot of money and the score just isn't there, odds are you won't qualify for the card.
Interest: Remember, if you don't pay the balance off monthly then you will get hit with interest charges on your purchases. And with a higher limit card, those rates can be more than with a standard business card. It's important to keep this in mind.
Security issues: As with any type of card there is always the threat of fraud or the number being stolen. You always want to stay abreast of your card's usage.
Alternatives That You Might Consider Over a High Limit Business Credit Card
A business credit card with a high limit is not the only way your business can get the purchasing power it needs. There are other options out there that you might consider. For instance, a business line of credit has several advantages over a credit card to include: even higher credit limits, the credit score requirements tend to be somewhat less stringent, and the paperwork is fast—some get funding in as little as a day.
Just keep your options open—see what's out there, what a lender is willing to do for you and what programs are available to help you gain access to the funds you need quickly.
First Union is a lender that wants to see your business succeed. We offer loans from short term loans to lines of credit. If you want to obtain a high credit limit call today!