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Small-biz card and your credit

By Janna Herron · Bankrate.com
Thursday, May 24, 2012
Posted: 4 pm ET

This month, two issuers each introduced a small-business credit card with travel rewards, part of a rash of card offerings for entrepreneurs that have rolled out in the last year and a half.

But before you sign up, make sure you know how a small-business credit card can affect your credit history.

Bank of America unveiled its WorldPoints Travel Rewards for Business on May 8, while Citi debuted its CitiBusiness/AAdvantage World MasterCard on May 15. That follows five new credit and charge cards that launched last year, four of which came from BofA.

The new offerings are attractive for startup owners as a way to separate business from personal finances. But, depending on how you sign up, the small-business card can show up on your personal credit report and affect your credit score.

(This is something to keep in mind, as it takes time for a new business to turn a profit.)

"Typically for small businesses, the owner was probably granted/opened the credit card on his/her personal credit," Clifton O'Neal, spokesman for TransUnion, wrote in an email. "If that is the case, it would most likely be reflected on their personal credit report."

If the business applied for the credit card and makes the payments, then the issuer probably pulled a business credit score, often supplied by Dun & Bradstreet, he says. The account wouldn't show up on a personal credit report.

Here's another factor to consider: Issuers may only report negative information on a small-business credit card account, says John Ulzheimer, president of consumer education at SmartCredit.com:

"Most (issuers) do not report to consumer credit bureaus unless the credit card goes into default. There are always exceptions to that rule, and their practices can change over time," he says.

The other key point to remember: Small-business credit cards aren't covered by the Credit CARD Act. That means nasty practices such as double-cycle billing or applying an increased rate on old purchases are all kosher for small-business credit cards, even if they ultimately affect your personal credit.

So, make sure to compare cards by looking at annual fees, interest rates, penalty clauses and rewards programs before signing up. And treat your small-business card like the ones in your wallet: Make monthly payments on time (preferably paying off the entire balance), charge only what your business can afford and keep balances low. Your credit may depend on it.

Do you have a small-business credit card? Has it affected your personal credit?

Follow me on Twitter: @JannaHerron.

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