Getting the right credit card for your business can make your life a lot easier as the owner. Not only does it help separate your business expenses from your personal purchases, but it can also help you regulate your cash flow, get rewards on every purchase you make, and more.
With so many business credit cards on the market, though, it can be tough to know how to go about picking the right one. Here are five steps you can take, along with some questions to ask to determine which one is best for your business.
Step 1: Check your credit
Even though you’ll only be using your new card for business-related expenses, almost all business credit cards require a personal credit check when you apply. This is primarily because the card issuers require a personal guarantee that you’ll repay the debt if your business can’t.
Most business credit cards require good to excellent credit, but there are some designed for business owners with fair or bad credit. Here are the ranges for each category according to FICO:
- Excellent: 800 to 850
- Very good: 740 to 799
- Good: 670 to 739
- Fair: 580 to 669
- Bad: 350 to 579
If there are any, you can report them directly to the consumer credit bureaus. If not, however, look for other areas that you can address to improve your credit score.
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Step 2: Understand what’s available
With so many different types of business credit cards on the market, trying to find the right card in a sea of cards can make your head spin.
To help you, we’ve broken it all down into three categories:
- Credit cards for less-than-stellar credit
- Credit cards that offer rewards
- Credit cards that save you money on interest
Of course, not all credit cards fit neatly into each group, so there may be a little overlap. In general, though, here’s what these categories look like.
Credit cards for less-than-stellar credit
If your credit score is considered bad or fair, your options are going to be limited until your score improves. With fair credit, you can still typically get approved for an unsecured business credit card, and you may even be able to earn some rewards.
With bad credit, however, you’re typically restricted to secured credit cards. These cards require an upfront security deposit, typically equal to your credit limit, which you may not get back until you close your account down the road.
One thing to watch out for when looking for a business credit card for fair or bad credit is the cost. These cards almost always charge high annual percentage rates (APRs) — we’re talking upwards of 20% — and some of them also come with annual fees.
Credit cards that offer rewards
Business rewards credit cards are best for business owners who want a credit card for operating expenses but don’t plan to carry a balance from month to month.
These cards offer rewards on everyday purchases, and some even provide a sign-up bonus after you spend a certain amount in the first few months. Credit card rewards typically come in the form of cash back or travel points or miles.
Rewards credit cards typically don’t offer low interest rates, and some of them charge annual fees to help make up for the value they provide. As a result, it’s important to look at more than just the rewards program to make sure you’re getting a good deal.
Credit cards that save you money on interest
If you’re considering carrying a balance on your business credit card, you may want to consider a low-interest card. The term “low interest” can come in two forms: an introductory 0% APR promotion on purchases, balance transfers, or both, or a low ongoing APR.
Cards that offer a 0% APR card can be good if you need to finance a large expense or want to avoid interest for a while as you work to get your cash flow in order. They can also help if you have a large balance on another business credit card and want to pay it down interest-free.
Some of these cards also offer rewards, allowing you to still get value after the 0% APR promotion is over. That said, once the promotion is up, these cards often charge relatively high APRs.
Credit cards that offer low ongoing APRs don’t typically offer an introductory rate but are good if you think you’ll be carrying a balance for a while. To get one, though, you’ll likely need to look to your local credit union instead of a major card issuer.
Step 3: Consider your needs
If you’re starting your search with the question, “What’s the best business credit card?” you may end up disappointed. That’s because there is no card out there that’s objectively better than all the others.
The better question to ask is, “What’s the best credit card for my business?” With that question, you can focus on what you need in a card, as well as your general preferences.
If you’re looking for a card for bad or fair credit, for instance, you may be focused on a card that can help you work on your personal credit. Capital One, for instance, reports card activity to both the commercial and consumer credit bureaus.
If you want a card that offers rewards, take a look at your top expenses to see if you can get a card that offers bonus rewards in those categories. Also, determine whether you’d prefer getting cash back or earning travel rewards.
Finally, think about what other features you might want in a card, such as a 0% APR promotion or low ongoing APR, special perks with your favorite airline or hotel, or other cardholder benefits.
Step 4: Shop around
The last thing you want to do is apply for the first card you see, even if you like what it offers because it’s possible that there’s another card out there that can do even better.
Take the time to compare top business credit cards to see which one is the best fit for your needs and preferences. And make sure to look past the initial marketing, which typically only highlights a few features.
Instead, look at each card holistically. If the card has a rewards program, do the math to determine how much you might earn with your monthly expenses. Also, look at how you’ll be able to redeem your rewards.
Among other terms and features, take a look at the fees and interest rates — you’ll usually see a range based on creditworthiness. Also, look out for other minor features that you might want to use, such as rental car insurance or expense management tools.
Again, there’s no right way to weigh these various features, so it’s important to know what you want before you start comparing cards.
Step 5: Apply for the card that gives you the best value
Since you already know what you want in a card, it’ll be easy to whittle down your selection to a few options. Once you have your shortlist, focus on which card will give you the best value, both now and in the future, and apply for that one.
If you can’t decide, it may be worth it to apply for more than one card. If that’s the case, though, consider spacing out your applications instead of applying for multiple cards at once. Not only will this strategy be better for your credit score, but it can help you avoid overspending in an effort to get multiple sign-up bonuses (if the cards offer them, of course).
The bottom line
Business credit cards bring a lot of benefits to the table for business owners and getting the right one can help you maximize the value of those benefits. As you take these steps, it’s important to recognize that the right card for you now may not be the right card for you down the road.
As your business grows, your expenses and preferences may change. Instead of trying to incorporate those possibilities into your decision process, though, focus on what works best for you now. Then when the time comes that the card is no longer working for you, you can replace it with one that does.
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This article was originally written on February 25, 2019 and updated on January 19, 2021.
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