Business Credit Cards

The Best Business Credit Cards That Don’t Require a Personal Guarantee

Whether you’re just starting a business or you’ve run your company for years, a business credit card can help you cover expenses while offering rewards and perks.

One of the biggest drawbacks of business credit cards, however, is that they typically require a personal guarantee.

Also called joint and several liability, a personal guarantee requires you to personally pay off your business credit card debt if your company can’t. If you don’t, it could damage your personal credit history, making it difficult to get credit in the future.

Why business credit cards require a personal guarantee

Small business loans and lines of credit often require collateral for approval. Since that’s not the case with credit cards (other than secured cards, that is), business credit card issuers require a personal guarantee instead.

It’s almost impossible to find a business credit card that doesn’t have a joint-and-several-liability clause.

“Banks like to have multiple ways to get repaid. The first source of repayment is the business. But if the business fails, banks want a second method of payment,” says Bob Neuhaus, vice president and practice lead of global financial services at J.D. Power.

“Small business finances are closely tied to the personal finances of the small business owner, so connecting a personal guarantee to the business card is a logical step.”

Business credit cards that don’t require a personal guarantee

It’s almost impossible to find a business credit card that doesn’t have a joint-and-several-liability clause.

The only card we could find that doesn’t have one for all of its cardholders is the Bremer Bank Visa Signature Business Company Card. The catch is that the card is designed only for medium and large businesses, excluding most small business owners.

According to Neuhaus, though, some credit card companies may be willing to negotiate on the topic of a personal guarantee. “It is possible as small businesses get larger and financially stronger,” he says.

“Shopping the relationship to multiple banks is the best way to test the willingness of banks to negotiate on guarantees. It is also possible to limit the scope of the guarantee as a partial step.”

As such, it’s critical to take your time when researching business credit cards, and don’t be afraid to reach out and ask about your options.

Other ways a business credit card can affect your credit

A personal guarantee isn’t the only way a credit card can impact your personal credit score. Depending on which card issuer you work with, the issuer may report other card activity as well.

For starters, every business credit card issuer will run a credit check when you first apply. This is why they require that you enter your Social Security number when you submit the application.

For most people, the hard inquiry will knock less than five points off your credit score. But if you’ve applied for a lot of credit recently, it could have more of an impact on your score.

Secondly, credit card issuers differ on how they report your ongoing credit card activity. Most issuers won’t report anything at all as long as your account is in good standing. But some will report all of your business activity to the consumer credit bureaus.

Here’s what to expect from the major business credit card issuers.

Card IssuerReports all activityReports delinquent activityDoesn’t report any activity
American ExpressX
Bank of AmericaX
Capital OneX
U.S. BankX
Wells FargoX

How to make sure your business credit card doesn’t hurt your credit

What’s the best way to limit the impact your business credit card can have on your personal credit? Avoid card issuers that report all activity to the consumer credit bureaus.

But if you already have a card with one of those issuers, there are two things to focus on.

1. Pay your balance on time each month

Your payment history is the most important factor in your credit score. If you pay your bill on time each month, your business credit card could actually help your credit score.

To avoid any mistakes, set up automatic payments on your account. Also, consider paying your balance in full each month. That way, you’ll avoid paying interest on the account.

2. Keep your balance low

The second-most important factor in your credit report is how much you owe. In general, this is based mostly on your credit utilization rate—or the percentage of your credit limit that you’re using at any given time. The Small Business Administration recommends increasing your credit limits and lowering your balances to help improve your credit (source).

Fortunately, this is typically easier with business credit cards than it is with personal credit cards. That’s because business credit cards typically offer higher credit limits.

If, however, you notice that you’re using a good amount of your limit, make multiple payments per month to keep it down.

The bottom line

A personal guarantee isn’t ideal and it’s downright overwhelming if you’re not sure your business will survive. As such, it’s important to keep it in mind when you’re searching for a card for your business.

If you’re planning on getting one, double check with the card issuer to understand how much they report to the consumer credit bureaus. Also, make sure you use good credit habits to avoid any potential negative impact on your personal credit score.

“Treat your business credit with the same care that you treat your personal credit,” says Neuhaus.