You can get a business credit card to use for your nonprofit organization, but the credit card would be the same type you use for your small for-profit business. Even issuers that mention they have a specific nonprofit credit card, such as the nonprofit business credit card on the Bremer Bank website, are simply a small business credit card touted as one for nonprofits.
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Most credit card issuers do not distinguish between a nonprofit business credit card and a for-profit business credit card on the smaller scale. Credit card issuers do not necessarily care if you use incoming monies for profit or as a nonprofit to better your cause, as long as a portion of the proceeds goes to paying off your business credit card bill on time.
Difference between a Nonprofit and For-Profit Business
One major difference between a nonprofit business and a for-profit business is what it does with incoming monies, according to the Entrepreneur website. Non-profit businesses typically use their incoming monies to advance their organizations or causes. For-profit businesses, on the other hand, generally want to make money.
Funding is another difference you usually find between a nonprofit and for-profit business. Funding for nonprofits may come from people or organizations that believe in the cause or mission of the nonprofit and are willing to put up money to help it grow.
Nonprofits are also eligible for a number of government grants that are not offered to for profit businesses.
Although your funding may come from various sources in the form of donations rather than loans you need to pay back, you may still need a financial boost from other sources. That’s where a business credit card may be able to help.
Using Your Personal Credit Card for Your Nonprofit Business Needs
You can use your personal credit card for your nonprofit businesses needs, but there are several benefits that come from holding a separate credit card only for your nonprofit business use, notes the U.S. Small Business Administration (SBA). Using a business credit card for nonprofit business purposes only helps ensure you can easily keep track of your organization’s expenses without the hassle of figuring out which expenses were for business and which were for personal use.
Using your personal credit card for your nonprofit business expenses can also have detrimental effects on your personal or your nonprofit business credit. Failing to pay off personal bills can jeopardize your nonprofit business standing, while failing to pay off your nonprofit business expenses can do the same for your personal finances.
One more benefit mentioned by the SBA is building up the creditworthiness of your nonprofit business. A separate business credit card can be an early step in establishing a strong credit history for your nonprofit. This can lead to greater funding down the road in the form of loans or other financial assistance.
What You Should Know Before Applying
Jumping on the first business credit card offer you see without doing your research can be dangerous. Some business credit cards may try to lure you in with the promise of very low annual percentage rates, rewards or other perks that sound great. Their greatness may diminish, however, once you read the fine print.
Extremely low APRs are often part of an introductory deal for credit cards; with the APRs increasing after the introductory period expires. Special offers and rewards may also come with obligations you have to fulfill.
Since one of your goals with your business credit card may be to build up the creditworthiness of your nonprofit business, pay attention to how the credit card issuer reports your business credit card activity. You want the issuer to report the activity on your nonprofit business’s credit record and not on your personal record.
Although officers of a nonprofit organization may not be held liable for certain debts if the organization gets into trouble, you may still be held responsible if you have offered your personal guarantee on any credit card applications.
Offering your personal guarantee may be the only way to receive a credit card early in the history of your organization. Some credit card issuers may waive the requirement if your nonprofit has built up enough credibility and creditworthiness, the SBA explains.
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