Business and personal credit cards may look similar, swipe the same, and may even offer similar terms and rewards as personal credit cards, but business credit cards have a few distinct differences. As a small business owner, contractor, or freelancer, you can leverage these differences to your advantage.
Here’s how to make business credit cards work for you.
Benefits of Getting a Business Credit Card
A business credit card offers positive benefits to your small business. These include:
- More flexible business spending. A business credit card gives you the option to take advantage of opportunities when they arise, whether that’s low-cost inventory or a deal on software you can use to save time and money in your business.
- Interest-free periods. Some business credit cards don’t charge cardholders interest for a specific number of months after account opening.
- Rewards and perks. Many business credit card offers include rewards points or cash back rewards. If you avoid interest by paying off the balance in full, you essentially get paid back for using your card on eligible purchases. Other perks can make business travel more enjoyable with upgrades, free checked bags or lounge access.
- Employee cards. Business credit card accounts typically allow you to offer cards to employees, and to control how much they spend and/or where they use the card. This can allow you to earn rewards, while also helping to protect your business budget.
- Better protection. Credit cards often give cardholders more protections on business purchases than business debit cards, so it can be safer to spend money using a credit card.
- Build business credit. Most credit card companies report business credit card payments to business credit bureaus, which might help you to establish your business credit scores.
Why Should You Get a Business Credit Card?
With so many business financing options out there, from small business loans to a line of credit, you may be wondering, “Should I get a business credit card?”
If you have your own business, even as a freelancer, the answer will often be yes.
To start your business, you might not need a $100,000+ business loan — but you might need a way to cover business expenses when cash flow is slow. Or you may want an easy way to finance a large purchase over several months.
And new businesses and startups might not be eligible for a startup business loan because they haven’t been in business for long enough, or aren’t making money yet. However, they may qualify for a business credit card.
Business credit cards can be a great way to build a credit payment history for your business, as long as you pay your balance on time (and in full when you can). This will open up great financing options down the road.
And, as we’ve mentioned, these cards can offer lucrative perks. Business card issuers want business customers as they spend more, on average, than consumers. As a result business cards may offer perks rewards like cash back or points, as well as welcome offers that provide bonus cash back or miles.
Here are eight things that you need to know before you apply for a business credit card.
1. You Don’t Need to Be Incorporated
While corporate cards are often only available to LLCs and corporations that have been in business for a couple of years, small business credit cards are different. They are typically available to any type of business, including sole proprietors who may be freelancers or contractors.
2. You Don’t Need an Employer Identification Number
While business credit card applications will ask for your company’s Employer Identification Number (EIN), you may not have one if you are operating as a sole proprietor. You can typically use your Social Security number (SSN) instead.
3. Business Credit Cards Aren’t Covered by the Same Laws as Personal Cards
The Credit CARD Act of 2009 created consumer protections for credit card holders, but it carved out major exceptions for business credit cards.
For example, the CARD Act requires card issuers apply payments to the highest interest rate balances first and give customers a 45-day notice before raising rates on future charges. It also prohibits issuers from raising interest rates at any time, for any reason.
Yet small business credit cards are exempt from these requirements. Thankfully, many credit card issuers have chosen to voluntarily apply many of these rules to their small business cards.
However, most issuers of small business credit cards will reserve the right to raise your rate if you are late with your payment, so setting up automatic payments is an especially good idea with these cards.
4. Your Personal Credit Will Likely Affect Approval
While you might assume that approval for a small business credit card application will be based on business credit history, your personal credit scores are likely to be a major factor in qualifying for one of these cards.
You will likely also be required to provide a personal guarantee when you open an account, which means that if your business doesn’t pay its bills, you are responsible for doing so.Some cards will report to your personal credit report, your business credit, or to both.
Many business cards are reported to one or more of the major business credit bureaus: Equifax, Experian, and Dun & Bradstreet. They may also be reported to the Small Business Financial Exchange, which in turn supplies information to credit agencies.
5. There Are Business Credit Cards for Different Types of Credit
There are all types of businesses with all types of credit profiles, and there’s a credit card for each one. While most cards require good to excellent credit, there are a few business credit cards for bad credit.
6. Business Credit Cards May Offer Promotional Financing
If you’re looking for a small business credit card to help finance company expenses, consider a card that offers an interest-free financing period.
Small business credit cards can come with 0% introductory APR financing on new purchases the first year, balance transfers, or both.
7. You May Combine Business and Personal Rewards
If you enjoy using your personal credit card to earn points and miles with your favorite airline or hotel loyalty program, you can add to your rewards with a small business credit card. When you apply for either a personal or a business credit card that’s co-branded with an airline or hotel, you will be asked for your loyalty program number. Since you’ll use the same number for the rewards you earn from both your business and personal credit cards, all of your points and miles will be pooled.
And if you’re earning rewards directly with a credit card program, you’ll also have your points combined. For example, the American Express Membership Rewards and the Chase Ultimate Rewards programs both allow you to combine the rewards you’ve earned from your personal and business credit cards.
Look for a business credit card that allows you to rack up bonus points on categories where you commonly make business purchases, like at gas stations or office supply stores. You may be able to reap rewards as statement credit, travel rewards, or gift cards.
8. A Business Credit Card Might Duplicate the Benefits of Your Personal Credit Card
Many business credit cards are nearly identical to the personal version. For example, the CitiBusiness® / AAdvantage® Platinum Select® Mastercard® comes in both a business and a personal version, each with a $99 annual fee. Both cards offer priority service when flying American Airlines as well as 2x bonus points for American purchases. Therefore, you might want to think twice before getting both the business and personal versions of the same card.
How to Get a Business Credit Card
Once you decide which card is best for your business needs, follow these steps.
Step 1: Check your credit
Check both your personal credit scores to help understand what cards you can qualify for. If your scores are low, consider working on building them up before applying.
Step 2: Know your annual business revenue
You’ll be asked about annual revenue for your business as well as your personal income on your business credit card application. If your business isn’t yet making money, Most card issues will allow you to qualify based on personal income sources.
Step 3: Research available reward options
Step 4: Understand your rates
Business credit cards offer comparable APRs to that of personal credit cards, but APRs do vary by card and are influenced by your credit scores and income. If you are applying for a business charge card, make sure you also understand the fees. Paying your balance in full each month can minimize the interest you pay.
Step 5: Apply strategically
If your application is denied, keep in mind that multiple credit card applications over an extended period can impact your personal credit scores. That’s why it’s helpful to try to apply for cards you’re more likely to get.
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Step 6: Apply now
You can apply for a business credit card online and get a decision typically in minutes. If approved, you’ll get your card in the mail in 7 to 10 business days. You’ll also get details about the credit limit, interest rate and terms you’ll want to review.
Applying for a Business Credit Card
The credit card application process isn’t super complicated and can often be done online. Qualifying for a business credit card starts with applying for a card that you can meet the requirements for, so make sure you understand them. Before you get a business credit card, you’ll need to gather certain information and documents, like:
- Your full name and address
- Business name and address (if different)
- Personal and/or business phone numbers
- Your social security number and date of birth
- Your business’s tax identification number if available
- Years in business
- Your business’s revenue
After you apply, lenders will usually perform a credit check on your personal credit. They may also check your business credit, but this depends on the credit card provider.
Getting Approved for a Business Credit Card
Your personal credit history can have a big impact on your likelihood of getting approved for business credit cards. If you have bad credit, you’ll have fewer options. You may not be able to get rewards cards at first, but secured business credit cards may offer a path toward them. Secured cards require a deposit and have lower credit limits, but can be easier to get than other credit cards. Using one may help you to increase your credit score.
Also, some retailers and vendors offer their own business credit cards or net-30 financing programs. These cards may be easier to qualify for than other business cards.
Credit cards typically offer variable APRs that can change. If you’re approved, the lender may mitigate their risk by offering you a higher rate than someone with good or excellent credit.
How to Use a Business Credit Card
A business credit card can be incredibly useful for increasing your cash flow when business opportunities arise that your cash reserves can’t cover. You can use it instead of, or in addition to, a business line of credit.
Using a credit card in your business can simplify your bookkeeping. But you’ll still want to establish clear rules around:
- Who can use a business credit card
- How many employee cards you’ll hand out
- What the cards can be used for
- How much you can spend each month
- How you will pay back the charges
Using your business credit card carefully is key to avoiding debt.
Additionally, using a business credit card may help to build your business credit. This may open up opportunities to get small business loans in the future.
Factors To Consider When Choosing a Business Credit Card
As a business owner you’ll have lots of choices when it comes to business credit cards. Here are the main factors you’ll want to consider:
Interest rates and fees
If you think you may need to carry a balance at times, the interest rate will be very important. However you probably won’t know the interest rate you’ll qualify for until you are approved. (Most cards display a range of rates and the rate you’ll get will depend on your credit scores and other qualifications.)
The exception is cards that promote 0% intro APRs. If you get one of these cards, you can get a 0% APR for several months to a year or longer.
Fees are also important. Annual fees may range from nothing to several hundred dollars a year. Cards with high annual fees tend to offer premium perks that may help offset the cost of the fee.
Other fees to consider: foreign transaction fees are charged when you make purchases outside the US and may cost 2—4% of a purchase. Late fees can be expensive, but you can avoid them by making at least the minimum payment on time.
Rewards and perks
Business credit cards often feature lucrative perks, and since business owners tend to put a lot of business expenses on their cards, these perks add up. The most popular perks include:
- Points or miles: You’ll often earn points—1 point per dollar spent, with some categories of spending (like travel purchases, gas, restaurants) earning 2x miles or points or more—or cash back, such as 1-2% cash back with bonus cash back in certain spending categories.
- Sign-up bonus: A card with a welcome bonus miles or points (or bonus cash back) allows you to earn more points and miles if you meet a minimum spending requirement in the first few months.
- Travel perks: Popular with those who like to travel, these rewards may include free checked bags, free lounge access, airline or hotel upgrades, and bonus points on airline purchases. Some cards also offer a statement credit for TSA Precheck or Global Entry once every few years.
Understanding the types of business expenses you’ll charge on your credit card can help you decide which card is best for your business. If you have a lot of spending in specific categories, like fuel or office supplies, for example, you may want a card that offers bonus rewards for that type of spending.
Credit score requirements
It’s rare that issuers will disclose the specific FICO score required to qualify. But most will let applicants know they need good or excellent credit.
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Reporting to credit bureaus
If you plan on using your card for major purchases, or give cards to employees, you may want to look for a card with a high credit limit or no preset spending limit. Note that in the latter case there may still be a cap on the amount of the outstanding balance you can have at any given time.
What Else You Need to Know
While business cards can be helpful, there are a few things to be aware of.
First are the fees you’ll pay. In addition to interest on purchases, you may be charged foreign transaction fees, transfer fees, or late payment fees. You’ll want to pay attention to when billing cycles fall so you always make your payments on time. Setting up auto pay for your minimum payments is an excellent way to help protect your business from late payments.
Keep an eye on your spending limits so you don’t have your credit card declined when trying to make an important purchase that your business needs.
It’s a good idea to separate your personal finances and business finances, so always pay your business credit card debt from your business bank account to keep accounting simple.
Looking for the best card for your business needs? Nav features the best business credit cards and reviews.
This article was originally written on June 8, 2018 and updated on June 5, 2023.