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How to shop for Business Credit Cards
Does your business need access to a line of credit? Whether you're looking to increase your company's purchasing power, cover cash flow gaps, build business credit, or gain access to perks and rewards, a business credit card can help.
And 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, there are a few things you should know.
What is a business credit card?
A business credit card is a credit card intended for use by a business for professional expenses. They are available for many types and sizes of businesses, from sole proprietors to large corporations.
They provide rewards on common business expenses, such as purchases at office supply stores, shipping, advertising, and travel. Small business owners can find the right card with the right perks a real boon.
Business credit cards usually have a variety of rewards and point options. Think of which types of rewards you are most likely to tap into, be it travel, tech, discounts on supplies, or others, and choose your card accordingly.
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 the Spend Manager, which allows you to add receipts and notes to your transactions.
How are business credit cards different from personal credit cards?
Business credit cards work much like personal credit cards. You gain access to a revolving credit line, make minimum monthly payments, and pay interest on balances that carry over past a billing cycle. However, they also offer rewards and features that specifically benefit businesses. Additionally, they can help your business to build credit.
So, though you can charge business expenses to your personal credit card, there are essential differences between personal and business credit cards. These include:
Since credit card issuers know that business owners spend more than the average household, business credit cards tend to have higher credit limits than personal credit cards. If you anticipate needing a lot of capital for your expenses, you'll need a credit card with a higher limit.
When Congress passed the Credit Card Act of 2009, they offered certain protections to personal credit card holders.
For example, credit card issuers can't change your APR overnight with no warning. They also can't charge you outrageous fees for small infractions.
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. However, there's no legal guarantee.
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. These include internet and phone bills, computer hardware and software, and more.
Depending on your business's typical expenses, one type of card may be better than another 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 plan to expand your business in the future, you may need a small business loan to do so. The problem is that these loans can be hard 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. Building a business credit history can take time — so the sooner you start, the better.
How to qualify for a business credit card
Business credit cards typically rely on your personal credit history when you apply. This means that you usually 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 is less than excellent, you may be able to get a card tailored for business owners with fair credit. Check out the Capital One® Spark® Classic for Business, for instance.
But if your credit is poor, you'll want to work on improving your credit score before you apply for a card.
If you're not in a hurry to get a business credit card right away and your credit is poor, consider making changes to raise your credit score. This will win you better offers with lower rates and flashier rewards. Focus on making improvements in these five categories, which determine your credit score:
- Your payment history, which accounts for 35% of your credit score.
- Your credit utilization, the percentage of your credit limit that you're actively borrowing, which determines 30% of your credit score.
- The length of your credit history, which determines 15% of your credit score.
- Your credit inquiry frequency, the frequency of hard inquiries for your credit score, determines 10% of your credit score. To clarify, when you apply for a loan or a new card, the issuer requests your credit score. When a credit bureau sees many of these requests in a row, it indicates that you're borrowing heavily (or at least trying to). This can be a risk factor for lenders.
- The mix of credit types you have determines 10% of your credit score. These include secured and unsecured loans, credit cards, and mortgages.
To get approved for a business credit card, you'll need to share some information about your business. These include its EIN (not applicable if it's a sole proprietorship), 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 should I compare business credit cards?
What should you consider when comparing business credit cards? When choosing between different business credit cards, ask yourself the following questions:
How much is the annual fee?
An annual fee is an amount you have to pay each year to use your credit card. The cost ranges from $0 up to about $450. If two cards offer equal benefits, it's obviously best to go for the card with the lower, ideally nonexistent, fee. But what if the benefits differ? Should you consider the higher-fee card based on its benefits?
The answer may depend on the stage of your business. If you're a relatively new business, you may not feel comfortable getting a business card that charges an annual fee. Getting a no-annual-fee business credit card will help if you're just starting out, you have modest revenues, and you won't be using much credit.
But if your business is well established and you spend a lot of money, you may get more benefit from a business credit card that charges an annual fee.
If you do choose a business credit card with an annual fee, make sure that its benefits justify the cost. Plus, watch out for cards that waive the annual fee for the first year — don't commit unless you're sure you can afford the fee in the coming years.
What other fees come with the card?
The annual fee isn't the only charge you'll face with a business credit card. Read the fine print on your credit card to learn about all the fees it will charge. If you don't, you might be blindsided by the figures on your next billing statement.
Credit card fees can include:
- Late payment fees. A fee for paying your monthly payment late. These often cost $35 to $40.
- Foreign transaction fees: You incur this fee by using your card outside of the U.S. or with foreign merchants. It typically costs 1% to 3% of the purchase amount.
- Balance transfer fees. The cost to transfer a balance from another card to your business credit card. Not all card issuers charge this fee, but when they do, it usually costs 3–5% of the transfer amount.
- Cash advance fees. The cost to withdraw cash from your credit line. A standard cash advance fee is $10 or 3% of the cash advance amount.
Be sure to read the credit card's terms and conditions to verify its fee types and amounts. You'll want a card with a competitive fee schedule.
You'll also want to choose the card that charges lower fees on the services you plan to use most. Fees 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, get a card that won't charge that fee.
How much are the APRs on the card?
Credit card companies often have separate annual percentage rates (APRs) for purchases, cash advances, and balance transfers. Additionally, some charge a penalty rate if you are more than 60 days late on your payment. Check all of the APR offerings of various cards to find the lowest rates.
Prioritize the APR types that suit your intended use of your business credit card. For example, if you intend to use the card primarily for purchases, look for a card with a low purchase APR. And if you know that you won't be taking out any cash advances, you can overlook a card's high cash advance APR.
Most major business credit cards charge high interest rates, but you may be able to find lower APRs if you look to your local credit union. If you're looking to get a lay of the land, SuperMoney has rounded up the 50 most reliable credit unions for you.
Is it really a business credit card, or just a charge card?
Credit cards let you carry a balance from one month to the next without penalty. Charge cards do not. If you need to be able to carry a balance, make certain you apply for a credit card and not a charge card.
But note: If you must carry a balance, keep in mind what interest rate you are paying. "Never pay the minimum payment due if you want to pay your card off or down significantly," advises Kristin Lee, the business owner and financial expert we quoted earlier.
As a general rule, carrying a balance is only a good idea if you're in a 0% APR promotional period and have a more profitable use for your money than paying down your card balance.
What credit score is required to get the credit card?
Many business credit cards require a personal guarantor, an individual who will pay the card's balance if the business can't. To qualify as a personal guarantor, you'll have to meet certain minimum credit score requirements. Check the credit card issuer's eligibility requirements to find out if you qualify.
Does the card have an introductory promotion?
Many business credit cards offer an introductory promotion. Check to see if any of your prospective cards are offering a kickback and, if so, calculate its value. Common signup bonuses include a bulk of points, miles, or cash back if you spend a certain amount within the first one to three months. Additionally, you may find cards offering 0% APR introductory periods.
What benefits does it include?
Credit cards often offer benefits, including auto rental collision coverage, fraud liability, travel accident insurance, emergency roadside assistance, price protection, extended warranty protection, and more. These perks can help you save money and get help while on the road. Check the benefits offered by a card and consider them when making your decision.
Are the card's rewards the best for your business?
Credit card companies offer rewards to entice businesses to choose their cards. These rewards come in many types. As with personal credit cards, business credit cards can vary in the type of rewards they offer to cardholders.
Check out the rewards programs of your prospective business credit cards, and take note of the value they will provide you. You'll want to ask yourself if the rewards make sense for your business.
Seek out a business credit card whose rewards suit your business' spending behavior. For example, if you fly often for business trips, a miles reward program could be a great fit. If you never fly, earning points or cash back might be a smarter choice.
For example, some cards offer up to 5% cash back on certain purchases. Of course, that won't do you any good if you don't spend much in those categories.
Other cards may offer a flat rewards rate on all purchases. This may be better for a business that doesn't spend a lot in one area.
Common reward programs include:
- Miles: Earn miles when you make purchases and redeem them for airline tickets.
- Points: Earn points that you can redeem for gift cards, merchandise, travel, or cashback.
- Cashback: Earn a percentage of each purchase back as cash.
By finding a card with the rewards that work best for your business, you can maximize your card's return on investment.
Are the employee card offerings and controls right for your business?
Rewards are not the only card features to keep in mind. Do you need to give employees access to the company line of credit? If so, you'll want to be able to get cards for your employees and control how those cards get used.
"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."
How do the employee-card features of the card you're considering match up with your business needs?
How high is the credit line?
Check the card's credit line to ensure that it will not be too high or too low for your business. Compare credit lines from different issuers to find the one that suits your needs.
Does the credit card help your business and personal credit?
Find out whether the business credit card will affect your business's credit and your personal credit. Will it appear on both credit reports? If so, it's an opportunity to influence both your credit profiles. On the other hand, if you want it to reflect only on one or the other, you can select for that instead.
Business credit card offers, rates, and conditions vary greatly from one to the next. To find the best fit for you, you need to shop around with an eye on these factors. Compare business credit card offerings to find the card that offers the best balance of cost, features, rewards, and benefits.
Business credit card FAQs
To wrap up, let's learn the answers to common questions about business credit cards.
What is the best credit card for a small business?
The best card depends on your business and needs. Browse a few options here and answer the questions above to find the best fit for you.
Can you get a business credit card with bad credit?
It is possible to get a business credit card with bad credit. But it won't be as easy as it would be if you had fair or good credit. You may have to answer more questions about your personal and business finances to prove your creditworthiness. Further, you may need to find a more creditworthy cosigner.
What is the easiest business credit card to get?
It will be easier to get approved for a business credit card from issuers with more lenient approval criteria. Look at each card's acceptable credit score ranges to find those that accept the lowest credit scores.
What qualifies you for a business credit card?
To apply for a business credit card, you usually need to provide your:
- Business type.
- Business information.
- Annual business revenue.
- Tax ID number (if applicable).
- Social Security number.
- Personal income.
- Personal expenses.
To qualify, your total financial picture - including both your professional and personal information - must convince the credit issuer that you can and will repay what you borrow. The exact qualification process varies from one card issuer to the next.
How does the APR work on a business credit card?
The annual percentage rate expresses how much you must pay per year to borrow money. The lower your rate, the less you will pay. For example, if you get a 19% APR and keep a balance of $1,000 all year, you will pay about $190 in interest over the year. If you have 25% APR, you will pay $250. The higher your balance, the more the difference will affect how much you owe.
Your monthly payment due date is typically 20 to 25 days after the close of a billing cycle. If you pay your balance in full by the due date each month, you won't have to pay any interest. However, if you still have a balance after your payment due date, you'll have to pay interest on that balance based on your assigned APR. Note that credit card issuers generally begin charging interest on cash advances immediately.
How do I find the best credit card for my business?
Now you know everything you need to find the best credit card for your business. Not only can a business credit card supplement your company's cash flow, but it can also offer rewards and benefits that provide your business with added value.
Ready for an easy way to compare offers? Check out our collection of leading business credit cards below to save time on your research.