Business Credit Cards: Everything You Need to Know

Business Credit Cards

Considering a business credit card for your shiny new company? Well, you’re on the right track. Statistics show that 65% of small businesses use credit cards on a regular basis, but less than 50% of those cards are in the business’s name.

There are a number of reasons to why using a business credit card instead of a personal credit card is a better approach to your business expenses. That said, let’s go over what you need to know!

Why Get a Business Credit Card?

Mainly, for the benefits! Business credit cards offer certain benefits that personal credit cards don’t. These include:

  • Business Spending Reports: Useful for expense management and managing your taxes.
  • Higher Spending Limits: Often a necessity to for operating cash flow.
  • Multiple Cards: A number of cards can be issued to different employees on the same account.
  • Perks and Rewards Programs: Exactly what it sounds like! The perks and rewards business credit cards offer will make it more cost-effective to use your business credit card than your personal card for company expenses.

What Risks Are Involved?

A few risks to consider before opening a business credit card:

  • You can damage your business’s credit rating if you aren’t mindful of your spending patterns. Make sure to pay your bill every month to avoid negative reporting. You can also run a higher APR, but this shouldn’t be a concern as long as you pay the balance every month.
  • Don’t run a line of credit off your business credit card. This way you’ll be able to benefit from the rewards without suffering additional interest and fees!
  • Although a huge reason to use a business credit card is to minimize risk to your personal credit, if you're a new business you’ll still probably have to put your own credit at some risk. We’ll dig into this more in a minute.

What’s the Best Business Credit Card?

There’s no single answer to this question.

Shop around and consider each card’s features. If a card requires an annual fee, what do you get in return? Often the most generous reward programs do require an annual fee, but make sure you’re going to take full advantage of the rewards before you commit to one of these. If they’re asking you to pay for your plastic, there should be a justifiable reason.

When it comes to rewards, think critically about your business needs. If you don’t travel much for business, perhaps you don’t need a card that will allow you to rack up frequent flier miles. Instead, you could seek out the most lucrative cash-back programs, many of which specialize in a particular category of spending (office supplies, fuel purchases, etc.).

And no matter what, make sure to look carefully at the terms and conditions of the cash-back program before you apply for the card!

Recommended: Read our review of the best business credit cards.

Can I Get a Card Outside Personal Credit?

We’ve been talking about how important it is to separate your personal credit from your business credit, and how a business credit card can help with that.

But the sad truth is, if you’re new to the business world, you’ll probably have to put your own credit on the line for a few years in order to maintain a business credit card. That said, it’s still a good idea, and if you’re already using your personal credit card for your business there’ll be little difference other than the rewards you’ll enjoy.

Here are a few things things you’ll need to do in order to eventually get a business credit card based solely on your business’s credit:

  • Be in business for at least 2 years. Most small-business credit card offers (without personal credit checks) will require your business to have been around for at least two years, since that’s the time frame within which most businesses fail.
  • Maintain a positive cash flow. If your business doesn’t have positive cash flow, it’s unlikely that it’ll have a good credit rating. While there are some exceptions to this, making sure your cash flow is in the green is pretty much essential.
  • Keep up a strong credit history. Have a couple trade lines of credit open, use them regularly, and pay them on time— every time. Look to “non-major trade” credit cards (like fleet fuel cards), or establish lines of credit from office supply stores or food vendors. Make sure they’re reporting your good credit history to business credit bureaus such as Dun & Bradstreet. Business credit card issuers are going to look at your business credit history, so keep it strong!

Wrapping Up

If you’ve planned your business carefully, a business credit card can serve as an awesome tool— the majority of the time, it’s better for your business than using a personal card or having a line of credit.

While you might not be able to qualify for one based solely on your business credit right now, it’s still important to get into the habit of separating your business expenses from your personal expenses. So start building up your business credit history, separating out your expenses, or even shopping around for a business credit card today!