A business credit card can be an incredible asset for your business. Many offer rewards and business-specific perks. Some offer introductory 0% APR promotions, which can help you save on interest. And most will also help you build business credit.
But you might be wondering when it’s the right time to get one, especially if you’re just starting out. Here are some signs that you might want to consider applying for one.
You have business expenses
One of the most important things a business owner can do is to separate their business expenses from their personal expenses. If you’re using the same credit card for both, it can make your life overly complicated when it comes to your accounting and tax return.
You may also have a hard time getting financing later on if creditors see that you’re mixing expenses — they may view this as irresponsible, which could affect their approval decision.
You don’t necessarily need a business credit card to separate your business and personal expenses. You can also use a personal credit card or a debit card. But business credit cards provide access to features and benefits that can make it a little easier to run your business.
Your personal credit score is in decent shape
Most of the best business credit cards on the market require that you have good or excellent credit. According to FICO, that means having a credit score of at least 670. (Note that major small business credit card issuers typically check the applicant’s personal credit.)
If your credit score is below that but above 580, which is considered fair credit, you will have trouble qualifying for many small business credit cards. With bad credit, your only option may be secured business credit cards, which require an upfront security deposit.
That’s not the worst thing in the world, especially if you want to start building a business credit history as soon as possible. But if you can take the time to work on building your credit first, you may have an improved chance of getting a better credit card.
You need to finance a large expense
If you’re purchasing a lot of inventory or need to buy some relatively inexpensive equipment, getting a business loan isn’t always easy. Some business credit cards offer an introductory 0% APR promotion that allows you to finance a large expense — or several regular expenses — for up to a year or more entirely interest-free.
You may even get the same benefit for balance transfers, which can help you move a balance over from another business credit card and pay it down without interest.
Depending on the length of the promotion you qualify for and how much you finance, you could save hundreds, if not thousands, of dollars in interest.
You want extra rewards on your purchases
Some rewards business credit cards offer bonus rewards on certain categories that are more common for business owners. Examples include office supply stores, cable, internet, and phone services, advertising, shipping, and more.
If you spend a lot in any one area, consider doing some research to see if you can get more back in the form of cash back, points, or miles on every purchase you make. Some cards offer flat rewards instead, giving you a single rewards rate on every purchase.
And depending on the card, you could qualify for a sign-up bonus worth hundreds of dollars, which you can use however you want.
If you get a cash back credit card, for instance, you can drive the rewards you earn back into your business or use them for personal expenses.
You want to start building your business credit history
Having a strong business credit history is essential as you expand your business. Getting a business loan with favorable terms isn’t easy when you’re just starting out, and it may not get easier if you don’t take the time to establish a positive business credit history.
This process can take time, so the sooner you start, the better. Just be sure to use the card responsibly, pay your bill on time every month, and try to keep the balance low relative to the card’s credit limit.
Developing these positive credit habits can help you build an excellent credit history, giving you more financing options in the future when you need them.
Anytime you want
Your business doesn’t have to be a certain size to qualify for many business credit cards. You don’t even need to have an employer identification number (EIN). Even if you’re not doing your business full time, you can still qualify for a business credit card, assuming you’re creditworthy.
So as you consider when the best time is to apply, think about when you want to start taking advantage of the features business credit cards offer. Maybe it’s when you open a business checking account or before your first expenses, or it’s later on when you feel like you’re well organized and feel comfortable adding one.
The bottom line
Business credit cards can provide a lot of value to all types of business owners, and getting one can help you build your business. But there’s no one-size-fits-all answer to the question of when you should get one.
As a result, it’s important for you to consider the needs of your business and your own preferences regarding credit. Also, consider your goals as a business owner, as well as how and when a business credit card might be able to help you achieve them.
Whenever you decide is the right time, make sure to take some time to compare top credit cards to ensure you get the most bang for your buck.
This article was originally written on April 19, 2019 and updated on February 3, 2023.