Personal Liability on Business Credit Cards
Below is a MRR and PLR article in category Finance -> subcategory Credit.
Personal Liability on Business Credit Cards
When applying for a business credit card, it's crucial to understand the concept of personal liability. If your business does not meet certain criteria, issuers will assess the credit risk based on your personal credit history.
Most issuers require you to agree to a personal liability provision before approving a business credit card. This means you, personally, are responsible for the debt, much like with a personal credit card. If your business fails to make payments, the issuer can pursue you for the debt.
This liability affects your personal credit report. If you miss payments, it can damage your credit score, and large business debts may appear as personal liabilities, making you seem financially overextended.
However, the personal liability agreement is not always permanent. If you consistently make payments, you might persuade the issuer to remove this provision after a few years. Negotiation is key, and building your business’s own credit history is essential to eventually separate business and personal credit.
It's important to note that business credit cards generally lack the consumer protections of personal credit cards. Consumer credit laws allow you to dispute billing errors and prevent issuers from marking disputed amounts delinquent or cancelling your card during the dispute. These protections do not apply to business credit cards. For example, if you receive damaged goods, you may not have the same recourse to dispute charges as you would with a personal card.
Despite these differences, having a business credit card can be beneficial. Once your business establishes its credit, you can effectively separate personal and business finances, which is advantageous for both you and your company.
You can find the original non-AI version of this article here: Personal Liability on Business Credit Cards.
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