A Complete Guide to Business Credit Cards

Everything you need to know about business credit cards. Learn how to find the best deal possible for your small business.

If you’re a small business owner, getting a business credit card can not only provide your business with a line of credit, but it could also provide you with extra rewards.

Whether you choose cash back to boost your bottom line or travel rewards to save money on business trips, a business credit card can make your life easier.

But before you apply for a business credit card, it’s important to know how they differ from personal credit cards, what benefits you can expect, and how to pick the right one.

What are business credit cards?

Business credit cards are tailored specifically to small business owners. They often provide benefits and rewards on common business expenses, such as purchases at office supply stores, shipping, advertising, travel, and gas.

“Business credit cards usually have a variety of rewards and point options,” says Kristin Lee, owner of KLBM, an entertainment business management company.

She adds, “I always advise my clients to think of which types of rewards they are most likely to tap into, be it travel, tech, discounts on supplies, or others.”

Some business credit cards also offer specific features to make it easier to track and organize your expenses, which can be helpful when you file your taxes.

For example, American Express offers business owners various tools, such as the Spend Manager, which allows you to add receipts and notes to your transactions.

How are business credit cards different from personal credit cards?

If you own a business, you might be wondering whether it’s necessary to have a business credit card. It’s not a requirement, but there are some differences to consider between business and personal credit cards.

Credit limits

Since credit card issuers know that business owners typically spend more than households, business credit cards tend to have higher credit limits than personal credit cards. So, if you anticipate needing a fair amount of capital for your business expenses, it makes sense to get a credit card that gives you more room to spend.

Consumer protections

When Congress passed the Credit Card Act of 2009, the new law offered certain protections to personal credit card holders.

For example, credit card issuers can’t change your APR overnight with no warning, and they can’t charge you outrageous fees for small infractions.

But those same benefits aren’t offered with business credit cards. Of course, most major credit card issuers still extend those same protections to business credit card holders, but there’s no legal guarantee.

Rewards

Personal credit cards often provide rewards for everyday expenses such as groceries, gas, and eating out.

On the flip side, business credit cards tend to offer rewards on business-related purchases, like internet and phone bills, computer hardware and software, and more.

Depending on your business’ typical expenses, one type of card may be better than the other for your needs.

Why it’s beneficial to build business credit

If your business is a small side hustle or sole proprietorship, you may think that you don’t need to build a business credit history. But depending on your plans, it could be a good idea.

If you ever want to expand your business in the future, you may need a small business loan to do so. The problem is that small business loans can be tough to get if your business has no track record with credit.

Building your business credit can make it easier to get funding when you need it without having to rely on your personal credit history. As with your personal credit history, building a business credit history can take time – so the sooner you start, the better.

How to qualify for a business credit card

Even if you have a well-established business credit history, business credit cards typically rely on your personal credit history when you apply. This means that you typically need to have good or excellent credit to get approved for a card — so, a FICO credit score of 670 or higher.

Before you apply for a business credit card, check your credit score using a service like Credit Sesame or myFICO to get an idea of where you stand.

If your score doesn’t quite meet those expectations, you may be able to get a card like the Capital One® Spark® Classic for Business, which is tailored for business owners with fair credit.

But if your credit is poor, you’ll want to work on improving your credit score before you apply for a card.

To get approved for a business credit card, you need to share a few things about your business, such as its EIN (you won’t have one if it’s a sole proprietorship and that’s OK), your annual revenues, and your monthly expenses.

If you have a new business, you may not know these numbers, but don’t worry – credit card issuers understand that new businesses can take a while to get off the ground.

How to pick the right business credit card

The right business credit card for you depends on a few different factors. Here’s where to start.

Stage of your business

Depending on how established your business is, you may or may not feel comfortable getting a business card that charges an annual fee. Getting a no-annual-fee business credit card is generally a good idea if you’re just starting out and you don’t have any revenues.

But if your business has been around for a while and you spend a lot, you may get more benefit from a business credit card that charges an annual fee.

Business expenses

As with personal credit cards, business credit cards can vary in the type of rewards they offer to cardholders. So, it’s important to know the type of expenses your business incurs and to match those expenses to the right card.

For example, some cards offer up to 5% cash back on certain purchases, but that card likely won’t do you any good if you don’t spend much in those bonus categories.

Other cards may offer a flat rewards rate on all purchases, which may be better for a business that doesn’t spend a lot in one area.

Other business-related perks

Not all business credit cards offer special benefits to business owners. So, if you want such perks, you’ll have to look for them. Compare several business credit cards to see what type of benefits they offer and how they can help you with your business.

“Business credit cards usually also afford employee cards and controls,” says Lee, “so that is extremely beneficial for business owners with teams that need to use cards.”

Fees and interest

Most major business credit cards charge high interest rates, but you may be able to find a lower APR if you look to your local credit union.

Also, fees can vary depending on the card and the card issuer. For example, most business credit cards charge foreign transaction fees, but some don’t. So, if you travel abroad for business or plan to, get a card that won’t charge that fee.

“The minimum payment almost always ensures that you’re barely paying more than your accrued interest, and that debt will hang over your head for what feels like forever.”

“Make sure that you are aware of your card being a proper charge card or a credit card. Do you have to pay in full each month or can balances carry forward without penalty?

“If you must carry a balance, keep in mind what interest rate you are being charged. Never pay the minimum payment due if you want to pay your card off or down significantly,” says Lee.

WEIGH THE PROS AND CONS

Business credit cards can be helpful, but they're not the best choice for everyone. Here are some benefits and drawbacks to consider before you apply for one.

Pros
  • Easier to get than a business loan or line of credit
  • Offer a higher credit limit than personal credit cards
  • Can help resolve cash flow problems
  • Offer business-focused rewards and benefits
  • Helps you build a business credit history
Cons
  • Typically require a personal guarantee, even if you have an established business credit history
  • Don't offer all the same consumer protections and personal credit cards
  • Charge high interest rates compared with business loans and lines of credit
  • Can hurt your personal credit if you miss a payment or default

The bottom line

Business credit cards can be helpful in building your business, but there are both advantages and drawbacks.

If you're interested in getting a business credit card, use SuperMoney's business credit card review page to learn more about the top options so that you can make the best choice for your business.

And make sure to use the card responsibly. Remember, you're personally on the hook if you miss payments, so make your payments on time each month and consider paying off the balance in full to avoid interest.

As you find the right card for your business and use it, you'll not only build a credit history for your business, but you'll also get amazing perks and rewards for your everyday business activities.

Business vs. personal credit cards

Business credit cards require a personal guarantee regardless of the type of business you own. This means that you're on the hook for payments if your business doesn't generate enough revenue to pay off the balance.
Unless there's negative information on your account, though, credit card issuers typically don't report business credit card activity to your personal credit report. They do, however, report to the business credit bureaus, which allows you to build a credit history for your business. Personal credit cards don't typically do that.