Business credit cards can be an essential tool in your small business tool belt. But the process of choosing the right card and then applying for it can seem overwhelming. That’s why Nav is here. In this article, we cover the current credit climate and why it matters, the best business credit cards out today, advantages of getting a business credit card, and how to get one.
Here’s our September 2023 business credit card breakdown.
What’s the Current State of the Business Credit Market?
The recent Credit Conditions Index from the American Bankers Association shows a slowing of the credit market in the next six months. It’s expected that credit will continue to be less available and less affordable early this year. These harsh conditions are brought about by factors like high inflation in the market and increasing interest rates. Plus, there’s ever-present talk of a looming recession, which doesn’t help lender or credit card issuer confidence.
All of these factors boil down to one important likelihood: It’s probably going to be more difficult for small business owners to get a business credit card in 2023.
Business Credit Cards in Today’s Climate
Because of the current economic situation, credit card issuers may be more hesitant to offer corporate cards to small business owners — or any borrower, for that matter.
Credit cards can provide padding to your business’s cash flow in times of need (like those brought on by sky-high inflation). Plus, some credit cards may help you establish and build business credit, which can make it easier to qualify for other types of funding like small business loans down the line.
Although it might be more tricky to qualify for business credit cards currently, there may still be options available to you. For example, a secured credit card may be easier to qualify for since it targets business owners with bad or no credit. A secured credit card issuer requires the borrower to put down a deposit, which it takes if the cardholder fails to pay back their debts. Thus, it’s less risky to hand out secured cards, and less risk means lenders may be more willing to offer them. But keep in mind that most secured cards are offered to individuals rather than businesses, and don’t give as much access to capital as other options. So these are often best used to build credit and then move on to an unsecured card.
You may also be considering a charge card, which is another option distinct from credit cards. However, these can require high credit scores to qualify and need to be paid off in full every month. So qualifying and managing a charge card might not be helpful (or even possible) for your small business in today’s climate.
Compare Options for the Top Business Credit Cards With Nav
Because there are so many choices, choosing a business credit card can be overwhelming. Instead of using search engines and picking a credit card at random, use a trusted source like Nav. Nav helps connect small businesses to their best funding options based on their individual business details. Sign up with Nav today to see your top funding opportunities instantly.
A small business card can help you build your business, as well. For example, you can earn rewards that you can put back into your business spending. Since every dollar counts, cash back rewards or a travel credit card that gives you miles for your everyday spending can be a huge asset to your small business’s finances.
Below we take a look at some of the top business credit card options this month. (Check out the full list of our business credit cards, too.)
Here Are 7 Excellent Business Credit Card Options
Best for travel:
If you want to choose how you get your cash back, theis a great option. You get
Best for expense management:
If you’ve got business travel, entertainment expenses, cell phones, or recurring subscriptions to pay for, the business credit card for expense management. Earn rewards, too:is a great
Best for less-than-excellent credit:
If your credit is less than excellent, thecan be a good choice. You’ll pay a annual fee and get rewards: The purchase APR is .
Best for building credit:
Themay be a good option for anyone with a low personal credit score who is looking to use a credit card to build their personal credit.
Best no-fee credit card:
Theannual fee for the also gets you — a great idea if you’re trying to save a little on your credit card fees.
Best cash back credit card:
For the, you’ll get great rewards of You can also qualify for a welcome offer:
Best 0% intro APR credit card:
With aannual fee for the , you’ll get a . Also, earn
Why Get a Business Credit Card?
There are many benefits to using a credit card to make business purchases. First and foremost, a business credit card can help you with separating your personal finances from your business finances. When you make all your business purchases on your business’s own card, it’s much simpler to see where your business’s cash is going and where you’re overspending. You may find expense management becomes easier overall when you use a business credit card.
Also, a business credit card might be able to help you establish and grow your business credit history. We discuss this in more detail below, but it’s one of the most important factors in getting business funding.
Many business credit cards give you rewards as well. A rewards credit card like a business travel credit card, for example, may offer travel perks like access to airport lounges, help with airfare cancellations, automatic hotel upgrades, or elite status in travel membership programs. So if you head to other states or abroad frequently for your business, a travel credit card can give back for purchases you’re already making and put more money back in your pocket. The same is true with other rewards programs that offer bonus cash or bonus points on business expenses.
Additionally, business credit cards may offer purchase protection on anything you’ve bought recently using the card. So if an item is stolen or broken, you can check with your credit card to see if it will cover the losses. Not all credit cards have purchase protections, though, so consider checking before you apply. Additionally, some cards may offer an extended warranty on some products.
A business credit card also usually offers free employee cards for small business owners who need staff members to make purchases for the business. This benefit isn’t an option with personal credit cards.
How to Get a Business Credit Card
As mentioned, qualifying for a business credit card in the current climate may be difficult, but there are steps you can take to try to increase your chances. Even a new business in its first year or sole proprietor like a freelancer may be able to qualify for a business credit card.
First, you need to know your creditworthiness based on your personal credit score. (Credit card issuers look to your personal credit rather than your business credit when making a decision). Download all of your free personal credit reports and check them for accuracy. Contact the credit bureau directly to correct any mistakes — this alone may make your credit score increase.
Once you know your credit details, you can either take steps to better your score or apply for a card that you qualify for. It’s better to have good to excellent credit but there may be options if you don’t. For example, you may be able to put down a personal guarantee in the form of a deposit to get a secured credit card. Just make sure you understand the minimum requirements before applying since the application process by itself can ding your credit score.
On the application, you’ll need information like your:
- Business name
- Business phone number and address
- Social security numbers for all owners
- Employer identification number (EIN)
- Time in business
Each credit card issuer is different, so you’ll want to check before you apply to make sure you gather all the correct information.
When choosing a business credit card, pay attention to whether the card is in the American Express, Visa, Mastercard, or Discover payment processing network. Not every network may be accepted where you shop, and you want to make sure you can get the most out of your business credit card.
How Having the Best Credit Score Possible Protects Against a Looming Recession
Keeping as much of your business’s cash on hand as possible is especially important during a recession. This means bumping up your savings and also getting the best rates on loans and credit cards that you can — which requires a good credit score. A good-to-excellent credit score can help you pay lower interest charges on the funding your business needs, which means you pay less to borrow.
Additionally, if you have good credit you’re more likely to be able to qualify for a rewards-earning credit card with perks like rewards points, travel rewards, bonus miles, or cash back. The best cards that offer rewards can help you earn money back on expenses you need to make for your business, which offsets the costs.
It’s a good idea to try to pay down debts and monitor your credit score in case a recession comes around in the coming months or years.
How to Build Business Credit History
There’s a difference between your personal credit history and your business credit history. Business credit is established and maintained by the three major business credit bureaus:
- Dun & Bradstreet
Equifax and Experian also offer personal credit scores, but business credit scores are completely separate. The ranges of business credit scores also vary, depending on the credit bureau. Get a breakdown of what a good business credit score is based on research from Nav’s experts.
Using a business credit card is one potential way of establishing and building your business credit score. With these cards, your payments are reported to the business credit bureaus that establish your business credit scores.
But this perk depends on which card you use since not all business credit cards have tradeline reporting. Establishing a tradeline (that does tradeline reporting) means that the vendor or company reports your payments to the credit bureaus. These companies usually report both positive and negative information — although Nav will never report negative information — so make sure you make all your payments on time or it can negatively affect your credit.
Get more information and advice on how to establish business credit, put together by Nav’s experts.
What Is the Range of Business Credit Card Interest Rates?
Business credit card rates determine how much you pay on the amount you borrow — the higher the interest rate, the more you’ll pay. According to the Federal Reserve, the current average interest rate on credit cards is 20.09%. This increased from 14.22% in 2018.
But this is just an average. Not everyone gets the same interest rate, even if they have the exact same business credit card. Cardholders may encounter a range of interest rates, depending on their personal credit score and other factors. The Consumer Credit Card Market Report from the Consumer Financial Protection Bureau (CFPB) shows that the higher your credit score, the lower your interest rate is likely to be.
Credit card providers select your interest rate when they offer you a credit card depending on these factors. But these interest rates are variable, meaning they can go up or down throughout the calendar year, depending on the market. There are many credit cards that charge well over 20% in interest for certain cardholders, so keep this in mind when you’re shopping around.
Cards with rewards rate may also carry higher interest rates, but the rewards may counter the higher fees. Keep in mind that each card in unique and individual terms apply.
What Are the Best Practices for Using Business Credit Cards?
There are several important rules that all small business owners should know that may make using a business credit card less of a hassle and more profitable.
First, to combat high interest rates, paying off your small business credit card in full every month (or at least as much of your balance as possible) is a smart move. The smaller a balance you keep on your cards, the less you’ll pay in interest — and the less likely it is to ding your credit score. And paying it off each month means your balance doesn’t skyrocket to a point that you can’t afford to repay it.
Next, make sure that the business credit card you apply for offers rewards for categories you already spend in. Plus, if the card has a welcome offer, make sure you can qualify for it to maximize your rewards.
Knowing your spending limits is also a good idea. You can only spend up to your credit limit on a credit card, and having a clear idea of this limit is useful. That way, you can budget correctly the amount that will go onto your credit card and avoid any potential related cash flow issues.
Finally, as mentioned above, use your business credit card to separate your business spending from your personal purchases. This habit makes tax season and accounting much simpler, and also may reduce your personal liability.
Business Credit Card Terms and Conditions to Know
The world of credit cards can seem complicated, but learning a few basic terms can help you navigate it easier. Here are the most common phrases and definitions you’ll run into:
Some credit cards charge a fee once per calendar year to use the card. Others get rid of this fee and don’t charge you to use the card. At first, it can seem like the right move to always choose a card with no annual fee. However, if the card has amazing rewards that you would definitely benefit from — and the rewards would add up to more than the annual fee — then a card with an annual fee may be worth considering.
Another fee to consider is the foreign transaction fee. This charge doesn’t apply to U.S. purchases but comes into play if you travel abroad. It’s a fee that’s a percentage of every purchase you make, so it can add up for international business travel. Many business credit cards don’t charge this fee, but some do, so it’s worth checking before applying.
Each credit card company structures its rewards program differently, and often it depends on the individual card as well.
At its most basic, a rewards program gives you something back on eligible purchases or specific spending categories. Some have a flat-rate reward for every purchase while others have a specific percentage based on what the purchase is. Many of these credit cards have bonus categories, like U.S. gas stations or office supply stores, that give you more for your money. Some also give you a bonus on the account anniversary year.
There are three main types of rewards programs in the credit card world:
- Rewards points
- Cash back
Points and cash back can usually be redeemed for options like statement credits or gift cards, depending on the program. You can typically use miles in a variety of ways, as well. Credit card providers don’t always require you to buy flights or other travel like rental cars or hotels with your miles, but it depends on the card provider.
Introductory APR period
Some business credit cards have a 0% APR offer for a period in between the first three months and 12 months, and occasionally longer. This offer means you don’t pay interest for a certain number of billing cycles, making these cards great for balance transfers. If you transfer your balance from a high-interest credit card to this one, it gives you more time to pay it off without racking up interest.
Ongoing APR only kicks in after so many months of card membership.
Other cards give you a sign-up bonus after account opening or after you spend so much in the first several weeks or months. A welcome bonus is a nice way to get an extra reward for opening a credit card account.
Your variable APR (also known as interest rate) starts after your introductory period of no interest ends, if your card offers that. The credit card provider will let you know your initial APR when you apply, but because it’s variable it can change throughout the year. So the interest rate you start at may be different from the interest rate you are being charged later that year. You can always log into your online account to check the current APR or call your credit card issuer to find out what you’re paying in interest. And your interest rate may not be set in stone. If you’re a long-time customer that pays on time, it’s worth calling the company to ask them to lower your rate.
Cash advance fee
A cash advance fee is a service charge that the card issuer will charge you if you use the credit card to get cash. Usually it’s a percentage of the advance or a flat fee and can either be taken out of the cash advance or posted as part of your credit card bill.
Balance transfer fee
When you transfer debt from one credit card to another — to take advantage of a 0% APR, for instance — the credit card that you transfer to will usually charge a balance transfer fee. The fee is often a percentage of the transfer, usually between 3% and 5%. It can be worthwhile to pay that fee if you can pay the entire balance off in time.
Foreign transaction fee
If you use your business credit card when you’re traveling internationally, you may have to pay a foreign transaction fee. This fee is assessed for every transaction you make with the card when you’re not in the U.S. and is usually a percentage of the transaction. If you plan to use a business credit card for international travel purchases, it’s a good idea to find one that doesn’t charge this fee.
If you don’t make the minimum payment by the credit card bill’s due date, a credit card issuer will usually charge you a late fee. On top of charging you the fee, late payments can also hurt your credit score, so it’s best to try to avoid late payments.