I hear a lot about business credit cards while traveling around and educating people about building the strength of their business, preserving cash flow, etc. People come up to me and regularly tell me that they have a thing called "business credit", (a credit profile for their business), because they have a credit card that has their business name on it. They don't have what they think they have.

Credit cards are issued to individuals, not businesses. Yes, I know, some businesses have corporate accounts. I had a corporate card with a company I used to do a lot of work for, but in the end, it was my personal credit report that was impacted by every dollar spent on that card. The company (a very, very large, global company) was telling the credit card company that the debts would be repaid, but the debt was all mine and nobody else's.

When people tell me that they have a business credit card, I tell them the truth: "What you have is a personal credit card with the business' name on it."

What's so bad about that? Well, for one, you have created another inquiry and open line on your personal credit report, and your personal credit can only handle so much, depending on your financial status, leverage of open accounts, etc. So, even thought you may be using the card to purchase supplies, etc., the card is only reflected on your personal credit and is not reported to the business credit bureaus.

Secondly, since I mentioned reporting, when does credit (for the most part) get reported? When it is late, in default, etc. So, if something were to happen to your payments on your "business credit card", now your creditor not only has your personal information to ding, but they can now report negatively on your business if they are so inclined. In essence, you may have ensured your business will never build credit, thanks to it potentially being flagged as "high risk".

Business credit cards? Myth, and this myth is busted!