Many small business owners love their business credit cards. They use them to smooth out cash flow, earn rewards like cash back or travel rewards, or simply for convenience. Most don’t need to be sold on the benefits.
But if one business credit card is good, are more cards better?
Here’s when you may—or may not—want to pay for multiple credit cards.
Why Apply for Multiple Credit Cards At Once
Business owners generally carry twice as many credit cards as consumers, according to a Nav report.
Here are common reasons business owners may need and want multiple credit cards, and why they may need to get them in a short period of time:
1. Finance a business. This is the most common reason for getting multiple credit cards. Small business financing can often be difficult to get, and many business owners report shortfalls in business funding. Credit cards often fill that gap, especially for startups who may not yet qualify for most small business loans.
There are many entrepreneurs who have newer businesses with not a lot of revenue (or are pre-revenue) but who have good personal credit, points out Jason Edwards, managing partner for Capwell Funding. They aren’t likely to get a small business startup loan as most issuers consider startups too risky. Multiple credit cards “can be the best way to meet their funding needs by combining the total limits of three or four business credit cards to accomplish this,” he says.
Get several credit cards, and together those credit lines may add up to the amount of financing your business needs.
2. Improve cash flow. Even if you pay your credit card bill in full each month, paying with a credit card gives you extra time to pay for purchases, which can improve cash flow. Depending on how you time a purchase, “you can create your own net-30 terms,” Edwards points out.
If you need to finance a purchase over several months, a credit card (especially one with a low APR or 0% APR) can be an easy source of short-term financing for your business. You may be able to get several credit cards with 0% intro APR financing and get up to a year or more of interest-free financing.
3. Reduce financing risk. Business owners don’t always realize that just because a lender gives you a loan (or line of credit), that doesn’t mean you have access to it forever. Many small business loans and lines of credit contain provisions that allow lenders to call the loan due and demand immediate repayment under certain conditions.
Even a credit card can be shut down due to charges the issuer finds suspicious.
By establishing multiple relationships with multiple issuers, “it basically distributes your exposure,” notes Edwards. If a lender or issuer decides to close one of your accounts, you still have others you can use.
4. Take advantage of rewards. You may use credit cards to earn rewards, whether that’s cash back or travel rewards. To make the most of them, you may want multiple cards to take advantage of bonus rewards in certain spending categories or to earn multiple welcome bonuses.
Let’s say you know you are going to have some large expenses coming up in the next couple of months. You could consider cards with strong welcome bonuses in order to make the most of that spending. Here are three examples of cards with excellent sign up bonuses:
Now that you understand why multiple credit cards may be helpful, how do you apply for more than one credit card at once?
How To Apply For Multiple Credit Cards At Once
First it’s important to understand how small business card issuers review credit card applications. When you apply for a business credit card, almost all major issuers will check your personal credit. (We’ll talk about those credit checks and the inquiries they create in a moment.)
The issuer will also ask questions about your business, including how much money you make (or project to make). Owners of new businesses may qualify based on other sources of income (including personal household income) and not just income from the business.
Often business owners hope that by applying for multiple cards at the same time the issuer won’t catch the fact that they are applying for more than one card, either with them or with multiple card issuers. Here’s the reality. That may or may not work, but you probably won’t know until you either get approved, rejected or get a message that your application is pending review.
There are firms that specialize in helping business owners get funding through multiple cards, but if you are going to DIY it, your best strategy is to choose the cards you really want and the ones for which you are more likely to qualify. (More on that in a moment.)
Keep in mind that some issuers may only allow a certain number of approvals in a short period of time. (That may not apply to business credit cards though.)
One advantage of applying for multiple credit cards at the same time is that you can gather all the information you need to fill out those applications and use it more than once. For example, if you have an Employer Identification Number (EIN) you can have it handy for when you apply. You should be able to more consistently and accurately apply for multiple cards when you do it all at once.
So how do you apply for multiple credit cards at once? You:
- Identify the cards you want to get.
- Fill out the application(s) online.
- Wait for a response.
- Follow up if needed.
Soft Inquiry vs Hard Inquiry
You may wonder about how applying for more than one credit card will affect your credit. It’s a valid question.
When anyone checks your personal credit (ordering either a report or score, or both) that creates an inquiry on your credit report. Certain inquiries don’t affect your credit scores. They are called “soft inquiries.” The ones that do are referred to as hard inquiries.
In the credit card context, a soft inquiry might be one where the issuer preapproves you for a card, and then a hard inquiry is created when you actually apply.
Overall, the impact of an inquiry is usually fairly small. A single inquiry may lower your credit score by a few points (a typical range is 3-10 points), and most people find their credit score recovers from this dip in a couple of billing cycles. In addition, most credit scoring models ignore hard inquiries that are more than a year old and inquiries are no longer reported after two years.
However, multiple inquiries could have a larger impact on your credit scores overall, so be prepared for a possible drop in your credit scores, even if it ends up being fairly short lived.
If you plan on applying for an important loan in the near future, such as a mortgage, or perhaps an SBA loan that requires good credit, be cautious about applying for new credit as inquiries could impact your ability to qualify or the rate you’ll pay. Consider waiting until you close that loan you need, or least talk with your loan officer before applying for new credit.
If you already have a credit card with a particular issuer, they may be able to review your application for a new card with them without creating a hard inquiry on your credit report. Each issuer’s policy on this varies; you can always ask if this is a concern.
Pros And Cons Of Applying For Multiple Cards In One Day
- Significant available credit limits may be obtained
- Diversify financing sources
- Flexible repayment options
- Have info handy for all applications
- Multiple inquiries can lower credit scores
- Some issuer policies may not allow multiple approvals
- Credit card debt can be expensive
- New credit cards may lower credit scores temporarily
Tips For Researching And Comparing Different Business Credit Card Options
If you’re trying to decide which business credit cards you want to get, think about how you plan to use your cards.
Cost: Consider the annual fee and interest rate. If you use your card heavily, a high annual fee may be worth it. If not, stick with one with a low fee. And if you plan to carry a balance, look for a low interest rate, perhaps even a 0% intro APR.
If you plan to make purchases outside the US, a card with no foreign transaction fee is a must.
Rewards: You can earn significant rewards on business credit cards. Popular rewards credit cards offer cash back and travel miles. If you are loyal to specific airlines or hotels, consider a cobranded card to earn perks like upgrades or free checked bags. If you like to travel but are flexible, consider cards that offer points that can be redeemed for travel with multiple airlines or hotels.
And take a look at bonus categories that may allow you to earn a higher level or rewards. For example:
Welcome bonus: Again, if you get a card with a strong intro offer and you meet the spending requirements, you may earn bonus points or cash back.
Increase Approval Odds
Knowing which cards you’re more likely to get able to qualify for can be tricky. Credit card companies don’t like to reveal all their underwriting criteria, as doing so could open them to fraud.
Most small business issuers will use two main criteria to evaluate business credit card applications: personal credit (of the applicant) and income (usually from all sources). While there are other factors they will consider, credit and income are usually the main two.
To get matched to the best offers based on your qualifications, sign up for free now with Nav. Nav can show you which business credit cards you’re more likely to qualify for so you can apply immediately.
Managing Multiple Business Credit Cards
There are three keys to successfully managing multiple business credit cards.
1. Make sure you don’t miss a payment. Late payments are expensive and can hurt your credit scores. Most business credit cards don’t report to your personal credit reports unless you default, so a single late payment may not directly impact your personal FICO scores. Still, late payments may impact your business credit scores. (Payment history is the number one factor for both business credit and personal credit.) Plus business credit card issuers will often raise your interest rate if you are just one day late with a payment.
Tip: Set up auto pay for at least the minimum payment so you don’t accidentally miss a payment due date.
2. Manage spending to avoid debt. “Set it and forget it” doesn’t work with credit cards. Keep track of your spending, or better yet, budget for your upcoming expenses so you can keep your spending in check. Entering your credit card expenses in your accounting software frequently will allow you to keep track of your expenses.
Tip: Use a business budget or accounting software to track your credit card spending.
3. Review credit card benefits. If you sign up for a credit card to earn benefits, make sure you use them. When you’re busy running your business you may miss out on perks you didn’t even know you have.
Tip: Check your online credit card account to see if there are perks you’re missing out on.
4. Review costs. Make sure you know the annual fees your cards charge and when they will renew. Pay attention to interest costs and any fees. If card costs outweigh your benefits, shop for a new card.
Tip: Set a reminder on your calendar a month before your credit card annual fee renews so you can decide if it’s still the right card for your business.
Nav’s Verdict: Multiple Credit Cards
Applying for multiple credit cards can increase your available credit and allow you to take advantage of significant perks. But it’s not for everyone. Be sure to check your credit before you apply, as good to excellent credit is often required to qualify.
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