Takeaways
- Business credit cards are short-term credit products issued by lenders.
- Business credit cards give startups access to short-term capital to operate.
- Business credit cards pay for equipment, supplies, inventory, and other expenses.
- Business credit cards can boost the creditworthiness of their business over time.
- Business credit card statement balances must be paid off monthly to maintain a healthy credit line and avoid high-interest charges.
Starting your own business is hard enough. Having to worry about how to fund it is just one of the many challenges of getting it off the ground. By finding the best business credit card, you can take your business to new heights and finance the purchases you need to attract new customers, pay for projects, and buy new equipment.
When looking to apply for your first business credit card, it pays to research the best cards on the market. There are business credit cards that are specifically designed to meet the challenges and stages of your business. Recent studies show that 56% of small businesses use credit cards regularly.[1] Understanding how these credit cards work can help you optimize your business finances.
Take the Next Step:
On Upgrade’s Website
Upgrade Credit Card
Smart Money Rating: 5/5
Cash Back: 1.5%
Best For: Establishing Credit History
Credit Line: $500 – $25,000 (Terms Apply)
What Is a Business Credit Card?
Business credit cards are credit payment cards issued by banks, credit unions, and financial institutions. These credit cards operate much like personal credit cards and are specifically designed to meet your business’s needs.
Business credit cards give the companies a line of credit up to an approved credit limit. Credit cards are one of the many ways to fund your business. Credit cards are a short-term financing solution that lets you pay vendors, buy inventory, finance rent payments, or purchase equipment.
Unlike personal credit cards, which are used for personal expenses, business credit cards are intended for business-related expenditures. Employees can use business credit cards to pay for items like:
- Travel Expenses: You can use your company’s card to pay for flights, hotels, rental cars, and other travel-related costs associated with business trips.
- Office Supplies: Startups and employees can purchase office supplies, equipment, and other necessary business materials with a credit card.
- Marketing and Advertising: Sometimes, businesses might need to start a new project before receiving payment. They can use credit cards to cover marketing campaigns, advertising expenses, and other promotional activities for the project.
- Employee Expenses: Companies reimburse employees for business-related expenses, like meals, travel, or telephone expenses. Employees can use a corporate credit card to pay for these items.
- Business Development: Many businesses source customers and clients by attending different business development activities. Credit cards can be used to pay for attending industry conferences, networking events, and trade shows.
Need to Fund Your Business? You Might Also Like:
Take the Next Step:
On Continental Finance’s Website
FIT™ Platinum Mastercard®
Smart Money Rating: 5/5
Best For: Building Credit
Initial Credit Limit: $400
When to Get a Business Credit Card
Getting your first business credit card can uncoil the spring to productivity. Credit cards offer short-term financing, an invaluable tool for businesses of all sizes. Here are some key reasons why your business should consider getting a business credit card:
- Establishing Business Credit: One of the primary benefits of a business credit card is that it helps establish and build a strong business credit profile. If your company uses a business credit card responsibly, makes on-time payments, and gets the right credit card, you can bolster your creditworthiness and improve access to future financing options, like traditional business loans.
- Separating Business and Personal Finances: Founders can often be tempted to blend personal and business expenses. Getting a business credit card for your C Corporation, LLC, or Partnership helps to bifurcate business and personal expenses. Separating these expenses makes it easier to track business finances, comply with tax regulations, and simplify accounting processes.
- Managing Business Expenses: Business credit cards offer easy-to-use tools for managing business expenses, linking to expense tracking software, mobile apps, and online account management systems.
- Improved Cash Flow: Small businesses use credit cards to solve short-term financing gaps or manage cash flow fluctuations. Short-term credit can be handy if your company has irregular income, seasonal revenue cycles, or unexpected expenses.
- Enhanced Control and Tracking: Business credit cards can also allow you to manage your company's cash flow efficiently. You can link your credit cards to expense reimbursement platforms that set employee spending limits and generate detailed reports for accounting and tax purposes.
You Might Also Like:
Take the Next Step:
On BlueHost’s Website
BlueHost
Smart Money Rating: 5/5
Best For: Website Hosting and Domains
Promotions: Free Domain for First Year (Terms Apply)
5 Steps to Open a Business Credit Card
1. Determine Your Business Needs: Before applying for a business credit card, carefully evaluate your capital needs. Factors such as your business structure, spending patterns, and financial goals should determine if securing a credit card is the right financing option for your company.
2. Research Cards: Before applying for credit cards, thoroughly research your credit card options. Banks and other card issuers compete to acquire new customers by offering different interest rates, annual fees, rewards programs, and credit limits. Find the card that best suits your business needs and budget.
3. Collect Personal and Business Information: If you are applying for your first business credit card, you must supply some personal and business information. To complete your credit card application, include your business's Employee Identification Number, online bank account records, company formation documents, and a government-issued ID.
4. Apply for Your Card: Once the credit card company has all your information, you can submit your credit card application. Most applications are completed online through the bank or credit card issuer's website.
5. Build Business Credit: After your application is approved, you can use your credit card almost immediately. Remember to maintain a healthy business credit report by paying your monthly credit card bill on time.
Take the Next Step:
Member FDIC
Primis Checking Account
Account Type: Free Checking Account
Required Minimum: $1 to Open
Bonus Offer: Earn 50 Cents for Every Purchase
Pros of a Business Credit Card
- Builds Business Credit: To secure the best financing options, businesses must maintain a strong business credit profile. Paying your credit card bills, suppliers, and vendors on time increases access to other debt and equity capital. (Read more about common stock).
- Separates Business and Personal Finances: Exclusively using your business credit card for business expenses keeps your personal finances off the company’s financial statements. As a business owner, you can make your life easier using only your business credit card.
- Improved Cash Flow: Business credit cards can provide a valuable source of short-term financing, helping to manage cash flow fluctuations and cover unexpected expenses.
- Rewards and Perks: Many business credit cards offer valuable rewards programs, like discounts on travel or rental car insurance, airport lounge access, and bonus points or miles programs for travel-related expenses. These perks can make business travel more enjoyable while saving your company money.
- Enhanced Control and Tracking: You can link your credit cards to expense management software programs to track expenses, generate financial statements, and keep detailed records for tax filings.
Cons of a Business Credit Card
- High Interest Rates: Business credit cards are usually unsecured and tend to have high interest rates. Carrying a balance on your business credit card can lead to significant interest charges, negatively impacting your business's profitability and credit profile. (Read more about unsecured credit cards).
- Risk of Overspending: Access to a line of credit can give your business the financial flexibility it needs. If it is not managed correctly, however, it can lead to overspending. Quick debt accumulation can lead to financial struggles for your business. Make sure to create a budget to control spending and avoid accumulating excessive debt. (Read the 5 Ways to Curb Excessive Spending).
- Negative Impact on Credit Score: Late payments, missed payments, and high credit utilization can negatively impact your business credit score, making it more difficult to obtain future financing and secure favorable terms with suppliers and vendors.
- Annual Fees: Some business credit cards have annual fees, which can add to the card's overall cost. However, you might be able to get your annual fees waived as part of the new card sign-up process.
- Limited Liability: While business credit cards help to separate business and personal expenses, you may still be personally liable for business debts, especially if you are the sole proprietor or a partner in a small business.
Smart Summary
Business credit cards are credit products issued by banks, credit unions, and financial institutions. Applying for a business credit card gives your company short-term financing to pay vendors, purchase equipment, and buy much-needed office furniture. Business credit cards let companies manage their cash flow, increase payment convenience, and boost financial flexibility.
You Might Also Like:
(1) FedSmallBusiness.gov. 2024 Report on Employer Firms: Based on the 2023 Small Business Credit Survey. Last Accessed February 10, 2025.
