Best Business Credit Card

If you need a more efficient way to organize business expenses, look into getting a business credit card. These credit cards work like any other credit card. But whereas a consumer credit card is used for personal expenses, a business credit card is often used solely for business expenses.

This card is also unlike a business debit card, which is tied to a business checking account. Debit cards use money in the business account, and you can only spend up to your available balance. A business credit card, on the other hand, allows you to make purchases on credit and doesn’t touch funds in a checking or savings account.

Even though a business credit card is useful for managing company expenses, there are a few things you need to know about these cards.

Business Credit Cards Vs. Consumer Credit Cards

Getting a business credit card is an excellent way to separate business expenses from personal expenses, as well as establish business credit. If your business doesn’t have its own credit profile, the bank issuing the card will use your personal credit history to determine eligibility, which includes assessing how much you currently owe and your payment history. Therefore, check your personal credit report and score before applying for a business credit card. You must have a good credit history which includes paying bills on time and keeping your consumer debt low.

But although a bank will evaluate your personal credit history before issuing a business credit card, business credit cards are different from consumer credit cards in many ways.

Discover the Best Business Credit Cards

Higher Credit Limits

When you apply for a consumer credit card, you can expect a credit limit up to a few hundred or a few thousand dollars depending on your income and your credit history. These limits are sufficient for many people, but they might be insufficient for business owners who need a sizable credit line for supplies, advertising, and other business expenses. Business credit cards can have much higher credit limits, which comes in handy when growing a company. The issuing bank might initially extend a low limit, and then gradually increase your credit limit as you demonstrate creditworthiness. To qualify for higher limits quicker, always pay your bill on time and don’t carry a large balance. Set a reasonable monthly spending limit and pay off the card in full each month.

Business Specific Rewards

Some business credit cards also include a rewards program where you earn points for every dollar spent. These can be redeemed for merchandise, statement credit, gift cards, etc. The difference between business credit cards and consumer credit cards is that business reward cards offer unique opportunities to earn points. Whereas a personal credit card earns points for everyday purchases made at gas stations, grocery stores and restaurants, business credit card rewards are often aligned with a company’s interest.

Not only can you earn points on everyday purchases, you might earn bonus points or receive a higher cash back percentage on purchases with office supply companies, computer/technology retailers, advertising companies, shipping companies, and different suppliers.  When shopping for a business credit card, consider how and where you’ll spend most of your business dollars, and then choose a card that rewards you for purchases in these categories. Let’s say you’re an eBay seller who ships products to customers, look for credit cards that offer rewards on shipping purchases.

Who’s Eligible for a Business Credit Card?

When you think of a business credit card, you might imagine someone running a large corporation applying for one of these cards. But the truth is, you don’t have to run a big operation to qualify. A sole proprietor can also submit an application for a business credit card. This includes a freelance writer, an eBay or online seller, a home daycare provider or someone running a commercial cleaning company. As long as you file business taxes and have business expenses, you can get a credit card exclusively for business.

Of course, a business credit card isn’t required as a business owner. Some business owners prefer the simplicity of a debit card or cash and they want to avoid debt—this is perfectly okay.  Keep in mind, however, a business credit card isn’t only useful for organizing expenses—it also helps build your company’s own credit profile. This is a steppingstone to getting a business loan in your company’s name.

If you’re thinking about having your company apply for a loan, later on, start looking into business credit cards. It takes a couple of years to build a strong business credit score, so the sooner you establish this credit the better.

Finding the Right Business Credit Card

Once you decide to get a business credit card, don’t choose any random card. A card that works for one business owner might not work for you, so shop around and make sure you understand the different types of cards available.

These cards are not one-size-fits-all. Options include cash back credit cards, low-interest credit cards, travel credit cards and more. There’s also the option of a secured business credit card if you have a low personal credit score and can’t qualify for an unsecured card. Secured credit cards require a security deposit and may feature higher interest rates and annual fees, so compare options to minimize your costs.

Choosing the right credit card can be challenging, but asking yourself the following questions can help narrow down your choices.

  • What types of rewards do you need? Rewards offered by business credit cards vary. Before applying for a card, do a self-evaluation and determine which rewards will benefit your business. Do you or your employees travel frequently for business, resulting in the company paying for several flights and hotels throughout the year? If so, look for business credit cards offering travel rewards, such as no foreign transaction fees, free baggage check, discounts on onboard expenses, and well as higher reward earnings on travel purchases. Or maybe you’re looking for a business credit card for everyday purchases or online purchases. If so, make sure you shop through your business credit card’s shopping portal whenever possible to earn additional points or higher cash back on purchases and use the card at every opportunity to maximize your rewards.
  • Which credit cards do your merchants accept? Business credit cards are offered by Discover, American Express, Visa, and MasterCard. But while some merchants accept all credit cards, others only accept certain kinds. Before you pick a business credit card, contact your merchants to see which credit cards they accept, and then choose a credit card based on your findings. It doesn’t make sense to get an American Express business credit card when your primary merchants don’t accept American Express.
  • Will you pay off the balance every month? You should pay off your credit card balance every month to minimize debt. Of course, this isn’t always possible when running a business due to cash flow issues. If you’re more likely to carry a balance from month to month, look for business credit cards that offer low-interest rates or a low introductory rate of 0% interest.
  • Does an annual fee make sense? Watch out for annual fees when comparing business credit cards. Some credit card companies charge this fee to offset the cost of a rewards program and cardholder perks. Only pay an annual fee if you’re certain that you’ll take advantage of a credit card’s benefits. Even if you’re okay paying an annual fee, always shop around and compare costs. By shopping around, you might find a business card with excellent benefits and a lower annual fee. Keep in mind that annual fees for business credit cards can be higher than the annual fee on a consumer credit card.
  • Do you need flexible repayment options? Cash flow problems can be an issue when running a business. Keep an open eye for credit cards that offer flexible repayment terms. Some business credit cards give you up to 60 days to pay with no interest, or the credit card company extends a discount if you make the minimum payment early.
  • Can you provide financial information for your business? Not only will the issuing bank review your personal credit to determine if you’re eligible for a business credit card, be prepared to provide a year-to-date Profit and Loss statement for your business, and previous tax returns (one to two years). Contact your accountant to get an updated Profit and Loss statement. This isn’t required by all banks, but some will request this information to confirm that the business is profitable and legitimate.
  • Can you benefit from other cardholder perks? Look for cards that offer additional cardholder protection. Some business credit cards include purchase protection where you can receive a refund if an item is lost, stolen or damaged within 90 days of its purchase (up to $10,000). Also, some cards include a free one-year extended warranty on purchases, as well as 90-day return protection in the event that a merchant doesn’t accept a return. Some limitations apply, so read the fine print of credit card applications to understand how these benefits work.

Pros and Cons of Business Credit Cards

A business credit card might come in handy if you’re a sole proprietor or running a corporation, but there are good and bad features of these cards that you should know about.

Pros of a business credit card

  • Helps your business establish credit. Opening a business bank account and getting a business credit card is one of the first steps to establishing a business credit score. For your business to build its own credit identity, you must apply for a D-U-N-S number from Dun and Bradstreet (D&B). This is a unique nine-digit number assigned to your business. You need this number to build your company’s credit profit and its Paydex score, which is a credit score instituted by D&B for businesses. To strengthen your business credit score, pay your bill on time, and don’t carry a balance or only utilize a small percentage of your credit limit. This is important because your credit card issuer reports activity to Dun and Bradstreet. Managing a business credit card responsibly can help you qualify for additional credit cards or a loan in your company’s name. The same way you monitor your FICO score, make sure you check your Paydex score at least once a year. Request your score from Dun and Bradstreet.
  • Easier record keeping. A business credit card can separate personal expenses from business expenses. Use your business card for office supplies and other expenses and it’ll be easier to track spending throughout the month for budgeting and tax purchases.
  • Lowers business expenses. Use a business rewards credit card for the majority of business-related expenses to help offset some of your costs. The more you use the card, the more you can save on business travel and supplies.
  • Access to additional cards. Look for business credit cards that don’t charge a fee for additional cards. This way, if your employees purchase supplies for the company or pay for business luncheons, they can charge these expenses to the business account rather than submit receipts for reimbursement.

Cons of a business credit card

  • “Good” activity may not appear on personal credit reports. Even though your personal credit helps you qualify for a business credit card, business credit is separate from personal credit. And unfortunately, some business credit cards don’t report to consumer credit bureaus, which means positive account activity associated with this card may not appear on your personal credit report or benefit your credit score. Some banks will only report business credit activity to consumer credit bureaus in cases of default. To keep your account in good standing and reduce the risk of credit damage, pay your business credit card on time every month. The only charge what your company can afford, make a note of due dates and set up auto pay to avoid late fees.
  • Business credit cards don’t include some consumer protections. The Credit Card Act of 2009 was created to protect consumers from certain credit card practices. Under this Act, credit card companies must give notice before charging a higher interest rate. Additionally, they can no longer increase interest rates after the first late payment, and the Act limits how much banks charge in credit card fees. Since these protections don’t extend to business credit cards, never miss a payment or exceed your credit limit, or else you could see an increase in your interest rate. Carefully read the terms of your business credit card. Look specifically for information related to late fees, interest rates, and penalties.

Learn More about Credit Cards


Bottom Line

A business credit card isn’t right for every business owner. But if you frequently purchase business supplies, or if you’re thinking of getting a loan in your company’s name someday, a business credit card is how your company establishes its own credit identity. Just make sure you manage the account responsibly to build a strong credit reputation.

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