Should I Get a Business Credit Card?

When you first start a business, even a small one, it might be easy to keep track of personal and business expenditures. But as your business grows and becomes more complicated, so will your finances. This problem leaves you on the fence asking, “Should I get a business credit card?”

What Is a Business Credit Card?

While a business credit card does not physically look much different than a consumer credit card, there are a few key differences to note.

For one, a business card typically offers higher rewards points for spending on business-related purchases, such as office supplies or even travel. Also, these cards tend to have higher credit limits so business owners can make bigger purchases.

But a huge difference between consumer and business credit cards has to do with the Credit Card Accountability and Disclosure Act of 2009, also known as the CARD Act. The CARD Act protects individuals with personal credit cards against unlawful fees and interest rate rises. This protection, however, is not extended to business credit cards.

There are also risks associated with having a credit card for your business. If you don’t pay off your balances, you could accumulate debt and hurt your credit score. And if your business fails, your credit card company will likely hold you personally responsible for the outstanding balances — meaning your credit score will likely suffer.

Still, many cards can offer you and your small business several other perks, including:

• Purchase protection
• Cash back and rewards points
• Increased spending power
• Travel benefits and protection

When choosing a business credit card, it’s important to analyze all of the features and fees. Also, consider your personal and business-related spending habits.

Read: 10 Best Business Credit Cards for Small Businesses

Should I Get a Business Credit Card?

While their benefits are enticing, business credit cards are not for everyone. Below are a few scenarios of when you should and shouldn’t get a business credit card:

1. Your Finances Are Disorganized: Yes

Putting all of your business and personal spending on one credit card can make it difficult for you to keep track of your finances. But with a business credit card that’s dedicated only to company expenses, “you eliminate the risk of co-mingling personal resources,” explains the U.S. Small Business Administration. In fact, many business credit cards can give you a report of your spending to help you stay on budget.

For example, Capital One Spark Business cardholders can get a quarterly and year-end summary that outlines spending. And when tax time comes, this type of summary can prove to be extremely beneficial.

2. You Have Bad Spending Habits: No

If you don’t use your personal credit card responsibly, you probably shouldn’t get a business credit card. Being the sole proprietor of a business credit card can make you liable for any debt your business incurs. So if your business goes under, you will still be accountable for your past business spending, and the debt can negatively affect your personal credit score.

3. You Make a Lot of Business-Related Purchases: Yes

Business credit cards usually come with annual fees, which also means they tend to have better rewards systems. Steve Chou, the small business coach behind My Wife Quit Her Job and small business co-owner of the online store Bumblebee Linens, uses his business credit card to take full advantage of the rewards.

“Businesses have lots of expenses, and it makes sense to apply these expenses towards rewards for travel or cash back,” he said. “For example, we earn multiple free plane tickets every year from shipping expenses alone.” In Chou’s case, his business was going to pay for shipping costs anyways, so why not cash in on some free plane tickets while he’s at it?

If you make multiple purchases for your business, look for a business credit card that will give you rewards in the form of cash, airline miles and more. Bank of America’s Business MasterCard, for example, offers 1 percent cash back on purchases, 2 percent at restaurants and 3 percent at gas stations and office supply stores.

Related: 9 Expenses to Skip on Your Next Business Trip

4. You Don’t Have Reliable Income: No

Business credit card users are not protected against retroactive rate increases and shorter billing cycles. “In fact,” writes Clark Howard, host of the radio show “The Clark Howard Show,” “small business credit card interest rates went up six times faster than interest rates on consumer cards immediately after the CARD Act went into effect back in 2010.”

If you don’t have reliable income or enough savings to afford the fluctuating interest rates, you probably shouldn’t get a business credit card. Take a look at your finances, do the math and figure out whether a business credit card’s variable and fluctuating interest rates will hurt you.

5. Your Start-Up Costs Are High: Yes

Business start-up expenses can be costly. While taking out a loan might provide you with better rates, small business writer Elaine Pofeldt said, “It is not easy for a new small business owner to get a bank loan. Bankers often want to see that you have a track record of several years in business.”

Your bank or credit union might deny you a small business loan, but a credit card can help you get the financing you need. “Getting a small business credit card can be a good way to obtain some financing for your business and build a strong credit profile,” said Pofeldt, “as long as you take steps, such as paying your balance on time.”

Keep reading: 6 Things Entrepreneurs Need to Know About Getting a Business Loan

The bottom line is this: If you are a responsible credit card user, then a business credit card can greatly benefit your business. It is important to evaluate your past relationship with credit cards and debt before obtaining a credit card, however. If you cannot pay off your business card each month, then you run the risk of a damaged credit score and possibly a failed business.

This article originally appeared on GOBankingRates.com: Should I Get a Business Credit Card?

This article by Ashley Eneriz first appeared on GoBankingRates.com and was distributed by the Personal Finance Syndication Network.