Business Credit Card
Reading Time: 8 minutes

DISCLAIMER: This article was written in 2021 and has not been updated. For more up to date information on economic impacts to small business funding, please read this recent article How to Get a Business Credit Card with No Personal Credit Check 

Financing any type of business can be challenging, but it is not impossible. Businesses require purchasing power both when getting started and to maintain operations later in their lifecycle. There are many financing options available to small business owners, including lines of credit, small business loans, business credit cards, angel investors, personal finances used for business, personal credit cards, and personal loans used for business needs.

As expenses start to roll in many business owners aren’t sure where to start, but it doesn’t have to be complicated. An easy place to start for any type of business is with a business credit card (of course with the caveat that sound financial principles should always be followed when using credit, as carrying payments month to month can be very expensive). In this article, we’ll look at a few of the most important things you should know about getting your first business card.

A business credit card creates opportunities for a startup or small business

Getting a business credit card is a great way to build business credit for startups and small businesses. This credit is important for opportunities down the road when you may need to secure other types of financing, like loans or lines of credit. These other financing options are not always available for new companies that have been operating for less than two years. But since the need for business purchases is just as urgent for new businesses, getting a credit card is a great way to finance things when you don’t have two years of income tax returns to provide. Keep in mind, of course, that building good credit requires that you pay off your card in full each month, so be sure that if you finance on a card, you can afford the payments.

Some new business owners worry that they won’t be able to secure a business credit card. They hear terms like business credit history and income verification and run for the hills. While the length of time your business has been operating is a concern to lenders and credit card issuers, it does not entirely determine eligibility. There’s a good chance that even a new business can qualify for a card, especially if you have great personal credit.

Business credit cards come with perks

There are many different companies that offer business credit cards. The ample competition works in your favor though, because banks will offer perks for choosing their cards. Shopping around for the available cards will allow you to look at what rewards are offered and which you would get the most out of.

Many new cardholders can benefit from promotional financing. For example, some credit card issuers will offer a special intro APR. The special financing will give no or low interest on new purchases during a select period, often the first year. There may also be promotional financing available for balance transfers or for the annual fee to be waived.

A rewards program may also attach points to purchases, which can be redeemed for things like statement credits, cashback, gift cards, and even travel rewards. They may offer bonus points for business or everyday purchases like those made at gas stations, office supply stores, and airlines. Some companies will allow you to combine your personal and business rewards for points and airline miles because you will use the same loyalty number with your personal credit card and the business charge card.

Often getting a business credit card will also allow you to get additional employee cards at no extra cost. Employee cards will allow your staff to have their own credit card to use for business purposes, and their access level and spending limit can be predetermined, saving you both time and worry.

Business cards are not just for corporations

Your business does not have to be a corporation in order to get a credit card. Many startups or small businesses are not incorporated. Partnerships, LLCs, sole proprietorships, and even freelancers can qualify for a small business credit card. If you are a sole proprietor or freelancer and don’t have an Employer Identification Number (EIN), just use your social security number (SSN) on the application form when it asks for your EIN, and you should have no trouble.

Some freelancers, sole proprietors, and small businesses may think that it is easier to just use personal cards, but that is not the case. Business credit cards usually offer higher limits and better rewards than personal cards. Using a card designated for the business name also allows you to keep business expenses separate from personal expenses. Some business credit cards even come with bookkeeping features for your business expenses which will come in handy when reporting to the IRS.

Your personal credit score matters

When applying for a business credit card, the lender will typically check your personal credit history, while also considering the age of the business and its credit history. A personal guarantee may also be required, which will factor in personal credit score. Personal guarantees mean that if the business is unable to make the monthly payment, you will be held personally responsible. For new cardholders, the guarantee can be intimidating, but it will only be an issue in the event the business can’t cover its expenses.

Once you have a small business card it may show up on your personal credit report, the business’s credit report, or both. Different credit card companies report to different combinations of credit bureaus, but most of them report to Experian, Equifax, and TransUnion.

Consumer protections differ for business credit cards

Federal laws like the Credit Card Accountability Responsibility and Disclosure (CARD) Act of 2009 have been put into place to protect consumer cardholders. The CARD Act requires credit card issuers to have transparency when it comes to rules and fees. It improves credit terms and the way finance charges are calculated, and even regulates when interest rates can be increased. But these rules do not apply to business credit cards.

The absence of protections like those offered by the CARD Act may put business owners in a position where they have to pay unexpected fees and higher interest rates. However, some credit card companies willingly offer some or all these protections to their cardholders. Before choosing a credit card company, find out if they offer CARD Act protections.

Finding the best business credit cards

Running a business is hard work. There will be planned and unexpected business expenses that you will have to cover on a regular basis, and a business credit card will be a useful tool to have at the ready. But before you hit the “Apply Now” button, you need to do a little homework about the cards that are available and their credit limits, interest rates, welcome bonuses (also called a sign-up bonus), reward programs, and which terms apply. There are a lot of options to choose from and it’s important to make an informed decision.

Being able to define your business needs is a good first step. It will allow you to match with the right credit card issuer. What are you looking for in a card? Something with low fees and minimal rewards, or something with a lot of benefits and potentially a higher price tag? Look at the nature of your business as well as things like growth potential, travel needs, and the number of employees. Getting a copy of your personal credit report is also a good idea. You can order one report each year from the major credit bureaus at no cost.

Some popular business credit cards are listed below to help you get started.

American Express

American Express offers a lot of different credit cards for businesses. The card is widely accepted and offers advantages to businesses of all sizes. The Business Platinum Card is one great card AmEx offers. The card offers 0% intro APR and the Pay Over Time benefit, which allows you to carry a balance from month to month. The Business Platinum Card is well-liked for its excellent travel benefits and bonus reward system that more than makes up for its annual fee.

Another great American Express card business owners recommend is the Business Green Rewards Card because it has no annual fee for the first year and a low one in the following years. The card offers the Pay Over Time option and good travel rewards. If you are looking for a card with great cashback benefits and a low annual fee, the Blue Business Cash Card may work better for you.

Chase

Chase offers another credit card popular with businesses. The Chase Ultimate Rewards program, which works with many of their cards, provides excellent travel points which are easy to redeem in the Chase Ultimate Reward portal. You can rack points up very quickly since the program earns points from several cards. Chase even allows the points to be transferred to partner airline and hotel programs.

Chase’s Ink Business Preferred card is a fan favorite and offers bonuses on travel redeemed through the Ultimate Rewards portal. The card has a low annual fee, low interest rates, and offers sign-up bonuses. The flexible rewards allow you to earn extra points for business expenses like shipping. Another popular Chase card is the Southwest Rapid Rewards card which offers great benefits including bonus points for Southwest purchases.

Capital One

Capital One is another popular credit card company. They offer a lot of different cards for all business needs and work well with small and newer businesses. Their Spark 2% Cash Plus card is a favorite because it has no preset spending limit and earns cash back on every purchase. They also have credit cards that are better for travel rewards like the Spark 2X Miles card.

Capital One works with new businesses to build credit. Their Spark 1% Classic is a great credit card for startup businesses wishing to establish credit history because they accept applicants with fair credit. The card offers cashback on all purchases with no expiration dates.

Conclusion

Business credit cards are a great tool to help you with business finances. But don’t just jump into things: Take some time and learn what credit card is right for your business. There is a card, and likely a reward program, that will work for you. Just remember to stay on top of your payments and keep the interest rate in mind before you decide to carry a balance.

Learn about the Biz2Credit financing process

Find more blogs

Apply Online in Minutes

Applying does not impact your personal credit score.