What Are the Top Benefits of Having a Business Credit Card?

Kim Franke-FolstadUpdated January 18, 2022

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Editor’s note: Lantern by SoFi seeks to provide content that is objective, independent and accurate. Writers are separate from our business operation and do not receive direct compensation from advertisers or partners. Read more about our Editorial Guidelines and How We Make Money.

If you’re a small business owner looking to better manage your finances, a business credit card may offer several benefits.Besides keeping personal and work expenses separate — which can be a challenge for busy business owners — maintaining a company credit card account can make it easier to invest in the resources necessary to help a small business grow. When used responsibly, a credit card can also help build your company’s credit profile. And, depending on the type of card you choose, your business could benefit from perks like free airline miles, cash-back rewards, and discounts. But, just as with personal credit cards, there can be some drawbacks to owning a business credit card. So it can be helpful to know what you’re getting into, and to set some boundaries for how you might use a business account.Recommended: Top Credit Cards

What Is a Business Credit Card?

A business credit card is much like a personal credit card, except it’s intended to cover only business expenses. Business credit cards are available to businesses of all sizes and enable a business owner to avoid tapping their own funds for business costs. Opening a business credit card can also help owners better track their business spending and streamline record keeping.Business credit cards generally will come with a higher credit limit than personal credit cards. This can make it a useful tool for financing a major purchase, or a convenient way to pay for office supplies or the expenses from a business trip.

How Do Business Credit Cards Work?

A business credit card is considered “revolving” credit. That means the amount of money available to borrow can go up and down repeatedly as you use the card and then pay back what you owe. You can pay off the balance every month or make the minimum required payment. But if you carry a balance forward, you’ll likely be charged interest on what you owe. And if you go over the credit limit set by the issuer, your purchase could be declined, or you may have to pay a fee.Business credit cards are offered by a wide range of lending institutions. The process for applying is similar to a standard credit card application. Business borrowers can typically apply with or without an employer identification number (EIN).To get approved for the top small business cards you typically need a credit score in the good to excellent range and have enough income to show the card issuer that you can afford the payments. However, if your credit is fair, small business cards for fair credit may be a good option to look into.

Why Should You Get a Business Credit Card?

There are several ways in which a business credit card might add value for a new or established business. Here are some to considier.

Financial Flexibility

Because they typically have higher spending limits than personal credit cards, owning a business credit card may make it easier to manage short-term or cyclical cash flow issues. Let’s say you’re waiting for a customer’s payment, but you need to buy supplies or a pricey piece of equipment ASAP. You can use your business credit card now, then pay off your purchase when you receive your customer’s check.And, if you pay your credit card bill on time and in full, you can avoid an interest charge. But if your business is cyclical, or cash flow is unpredictable, you have the option of carrying a balance until revenue picks up again.

Easier Bookkeeping

If you’re a small business owner who’s having trouble separating personal and business expenses, opening a business credit card could help resolve your bookkeeping issues.Each month, you’ll receive separate billing statements for each account, which can make it easier to track and compartmentalize your spending. And, if you need to look up a past expense, you can save time by knowing which account to review.Separating personal from business costs can also save you time and stress when it comes time to file your income tax return. Depending on which card you choose, you may even have access to online tracking tools that are compatible with your own accounting software.

Building Company Credit

Using your business card responsibly could help you build a stronger credit profile for your business. This can have a positive effect on several aspects of your business dealings — from easier access to future financing and lower interest rates to an increase in the amount of credit a supplier might be willing to extend. Using your personal credit card to pay for business expenses won’t have a positive impact on your business credit score.

Reaping Rewards

Many business cards offer perks such as travel miles, points, or cash-back rewards that could benefit your business. These benefits can vary. Some business credit cards offer extra points for specific types of purchases. Others may offer a statement credit as a reward when a user spends a predetermined amount. You also might be able to take advantage of discounts on business-related expenses like shipping, advertising, or travel. It can be a good idea to review your monthly business spending to see where you tend to spend the most. You can then look for a card that offers rewards that best fit your company’s spending pattern.

Supervised Employee Spending

Some credit card companies also allow you to issue free employee cards with a predetermined spending limit. This allows you to monitor how your employees are spending company money and, potentially, find new ways to save. Your employees will probably like this idea for the same reason you do — it can make it easier to separate their business and personal spending, and they won’t have to use up the available balance on a personal card while they wait to be reimbursed.

What Are The Cons of a Business Credit Card?

With any financial decision, it’s important to consider both benefits and the risks. Here’s a quick look at how they shake out. Pros and Cons of Business Credit Cards Here’s a closer look at some of the potential drawbacks to be aware of when considering a business credit card.

You’re Still Responsible

When you apply for a business credit card, the issuer likely will require a personal guarantee that if the business falls behind on payments, you agree to be held personally responsible for the debt. This means that if the account goes to collections, the agency could come to you for the money, and even sue for payment. Some card issuers will waive the personal guarantee requirement if your business meets certain size and revenue criteria.

Defaulting Can Damage Your Credit

Some business credit card companies report negative information to the consumer credit bureaus, and that can impact your personal credit score. Though a business card can help ease the pressure on your personal finances, it’s still important to remain disciplined with spending and pay bills on time.

Interest and Fees Can Be Expensive

If your business carries a balance forward from one month to the next, the interest charges could get expensive. Unless you can get a no annual fee credit card, you may also have to pay a steep fee each year just to have the card.

Fewer Consumer Protections

Many of the consumer protections put in place by Congress, including the CARD Act of 2009, are limited to personal credit card use. Some card issuers have extended those safeguards to their business card holders, but not all. So, it can be a good idea to check the credit card agreement to be sure you’re protected.

Differences Between a Regular Credit Card vs Business Credit Card

Though business credit cards and personal cards are similar in many ways, there are some notable differences.

Credit Reporting

While the companies that issue personal credit cards typically report all account activity — positive and negative — to the three major consumer credit bureaus every month, the reporting policies for business cards can vary. Some report only to the commercial credit bureaus. Others report to both consumer and commercial bureaus. And, some report all activity to the commercial bureaus but will send negative information to the consumer bureaus. If you have concerns or goals regarding how your business card might affect your personal credit, you can check out the issuer’s reporting policy before applying.

Credit Limits

If the issuer considers your business revenue as well as your personal income and general creditworthiness when you apply for a business card, you may be able to qualify for a higher credit limit than you’d get with a personal card. So a business card may provide more purchasing power than a personal card. Information about credit limits will be included in the credit card terms and conditions page on the issuer’s website.

Rewards Programs

Both personal and business credit cards offer rewards programs. And, you can often find small business cash back cards. However, the rewards and discounts available through business credit cards often target more business-specific needs (such as shipping or advertising) than those provided by personal cards.

Special Financing

If you’re looking for the top 0% APR credit cards, you’re more likely to find it with a personal credit card. The business cards that do offer this type of promotion tend to limit the special rate to a year or less, and it may apply only to purchases, not balance transfers.

Expense Tracking

One of the big pluses of owning a business credit card is that it can help with general bookkeeping, in large part because it keeps personal and business expenses separate. However, some credit card companies also aid their business card holders by providing detailed quarterly or year-end statements that can be used for preparing tax returns and year-end reports. In addition, many offer online tracking tools that can help business owners keep tabs on spending.

Consumer Protections

It can be wise to understand your rights as a credit card user no matter what kind of card you’re using. But because certain legal protections apply only to personal cards and not to business cards, you may want to be extra vigilant when checking the issuer’s policies regarding interest rate changes or charging certain penalty fees.

How Do I Apply for a Business Credit Card?

Once you’ve shopped around and looked at the costs and benefits of different credit cards, the next step is to apply for one. The process of applying for a business credit card is similar to applying for a personal credit card, but there may be a little more paperwork. Here’s a basic step-by-step.

Check Your Credit

You can expect the card issuer to base your approval on both your personal and business credit history. So, even before you begin the application process, it can be a good idea to make sure the consumer credit bureaus (Equifax, TransUnion, Experian) and the commercial credit bureaus (Experian Business Credit, Equifax Small Business, Dun & Bradstreet) have up-to-date information.Your credit also can be a factor in determining the APR and other terms you qualify for, so it can be helpful to clear up any inaccuracies before you apply for a card.

Gather the Information You’ll Need to Apply

Most credit card companies now accept online applications, and you’ll likely be asked for both personal and business information. This may include:

The legal name of your business
Your business address and phone number
Your Social Security number (SSN) and, if you have one, your business’s Employer Identification Number (EIN).
The type of business
How much revenue the business generates annually
Monthly business expenses
Personal household income
Your date of birth
The date the business was started or number of years in business

The Takeaway

If you’re using your personal credit card regularly to pay for business expenses, you may want to consider the benefits of owning a business credit card. Opening a small business credit card can be a great way to streamline and keep track of day-to-day business expenses while enjoying added perks and rewards. And, if the card is used responsibly, it could help build your business’s credit profile. Still, adding another credit card to your wallet means adding another financial obligation. And, as the business owner, you may be held personally responsible if your business defaults on making payments. Just as with a personal card, discipline is key.If you’re ready to put a business credit card to work for you, using a comparison website can help you research the lowest interest rates and fees, and find the best rewards for your business. These sites can help you quickly get details like:

The regular or introductory APR
The annual and other fees
The credit score required to qualify
Any bonuses, discounts, and rewards

Lantern by SoFi makes it easy to compare credit cards online (and all in one place) so you can choose the best option for you.

Photo credit: iStock/kate_sept2004The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.SOLC112193

About the Author

Kim Franke-Folstad

Kim Franke-Folstad is an award-winning journalist with 30 years of experience writing and editing for newspapers, magazines and websites. Her work for SoFi covers a range of topics related to personal finance, including budgeting, saving, borrowing, and investing.

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