What Exactly Is a Business Credit Card?

A business credit card is a line of credit granted to a sole proprietorship or small firm. Business credit cards enable business owners to keep personal and business costs separate. This makes record keeping easy, especially during tax season.

How do company credit cards function?

Business credit cards function similarly to personal credit cards, with the distinction that the card may have a different rewards structure or provide additional protections.
Business Credit Card Types

Small business cards and corporate cards are the two most frequent forms of business credit cards. These are modest business cards that can be applied for without having a special financial arrangement.

Credit Cards for Small Businesses

 

The majority of business credit cards are offered to small firms. These cards assist business owners in managing their finances while collecting incentives and reaping benefits developed specifically for small businesses, such as intro APR periods, free employee cards, zero liability safeguards, and purchase or trip protections. Many of these cards, including the best business secured cards, are also intended to assist businesses develop credit or, like the best credit cards for new businesses and startups, manage day-to-day purchases throughout the early stages of their operations.

 

Credit Cards for Businesses

 

P-cards, often known as corporate credit cards, are normally only available to organizations with considerable annual expenses—say, a quarter million dollars or more. These cards often provide many of the same benefits as small company credit cards, but on a much larger scale and with very different administration. Corporate cards are frequently controlled by huge programs designed to cater to corporate spending monitoring systems, and they may include a variety of charge structures, reward structures, and bonuses.

How Many Commercial Credit Cards Should I Have?

It is up to you and your individual needs to choose how many business credit cards are appropriate for you or your business. Carrying numerous business cards may help you to earn more diversified rewards, maximize your cash-back potential, give a more comprehensive set of advantages, and more, but it’s important to understand that managing many accounts requires extra time, monitoring, and bill payment.

Because different types of cards offer different prizes, you may require more than one type of card if you want to earn more than one type of reward. Some business cards, like consumer cards, collect airline-specific points, while others earn cash back. If you want to earn both with just one card, a flexible-reward-currency card is a good compromise. Chase Ultimate Rewards can be earned with the Chase Ink Business Cash® Credit Card, for example. Chase Ultimate Rewards can be transferred to participating hotel and airline partners, as well as transferred to personal Chase accounts for increased redemption value with personal credit cards such as the Chase Sapphire Reserve®.

Benefits also factor into the decision to carry numerous cards. If your cash-back card provides extended warranty benefits but no travel protections, you may want to consider obtaining a second business card for scheduling business trips. advantages are frequently disregarded in favor of rewards, but in the case of many insurances and protections supplied by the finest business cards, the value of many advantages can easily outstrip prizes.
Expert Advice

If you own multiple small businesses, having a separate business credit card for each one can help keep business purchases and transactions separate. However, because most business credit cards require the owner to provide a personal guarantee, it’s important not to apply for too many business credit cards at the same time, even if they are for separate businesses.

Inquiries against your personal credit when applying for business credit cards may affect your credit score and lender perception of your creditworthiness, so it’s ideal to space out your business credit card applications, even if they’re for different businesses.

Who Should Apply for a Business Credit Card?

Any company that plans to charge purchases should obtain a corporate credit card. Keeping personal and company costs separate is a smart accounting rule of thumb. Furthermore, obtaining and carefully utilizing business credit cards contributes to the development of your company’s credit history, which can be advantageous when asking for future loans or other funding.

More here: What You Should Know Before Getting a Business Credit Card

The Benefits and Drawbacks of Business Credit Cards

Personal and business funds can be kept separate with the use of business credit cards.
Business credit cards frequently offer larger credit limits than personal credit cards.
When it comes to making purchases, corporate credit cards give them more options.
Tools for tracking spending across accounts or staff may be included with business credit cards.
Business credit cards can aid in the establishment of business credit scores.
Some company credit cards offer reward points.

Cons:

Another account to keep track of is business credit cards.
Business credit cards may facilitate debt accumulation.
Membership or other fees may be required for business credit cards.
How Do You Evaluate Business Credit Cards?
Picking the finest business credit cards in 2023 can be a time-consuming process with so many different types of business credit cards available. Prospective cardholders must analyze a number of aspects before deciding on the ideal match.

 

Annual Charge

Annual fees frequently cover the membership benefits provided by cards. Prospective cardholders should figure out how much they’ll need to spend to earn enough rewards or cash back to cover the cost.

Earnings Distribution

Some credit cards promise high points-per-dollar deals, but when it comes to redeeming the points, they fall short. Be thorough in examining each point value, and make sure to look beyond the number of points to what the points will truly earn you.

APR introductory

Many cards will include not only a welcome incentive, but also an introductory APR. Consider how long the reduced interest rate will be in effect and establish a plan to pay off any major purchases before the intro APR ends and the card’s regular interest rate takes effect.

APR is still active.

If your company must carry a load, looking for a credit card with low interest rates or interest-free promotional periods can help you save money. Always keep in mind that APRs are calculated based on your creditworthiness, so the lowest interest rate displayed in the terms and conditions may not be the one you receive upon acceptance.

Financing Alternatives

Is the card a credit card or a charge card? A charge card must be paid in whole each month, whereas a credit card allows you to carry a balance with interest. Make certain that you understand the sort of card you are looking for and that it will meet your needs.

How Do I Obtain a Business Credit Card?

When you’re ready, gather your Employee Identification Number (EIN) or Social Security number (SSN), as well as your income details, and apply online or at a bank location.

More information: How to Get a Business Credit Card

How to Obtain a Business Credit Card Without Providing a Personal Guarantee

It might be tough to establish company credit, and some cards will require a personal guarantee. This means that an individual (often the person applying for the card on behalf of the corporation) will be held accountable for any outstanding amounts on the card. There are cards available that do not require a personal guarantee for individuals who do not wish to be tied to a company account, such as the Brex 30 Card.

How to Obtain an Instant Business Credit Card

Most cards that allow you to apply online will notify you immediately if you are approved. The bank may occasionally need further information before granting you a credit line, but you’ll typically find out when you apply.

How to Obtain a Business Credit Card Despite Poor Personal Credit

Your personal credit score is frequently reviewed as part of the application procedure for small business cards. If you have negative credit, you should limit your options to cards meant for people with poor or limited credit histories. For individuals who can pay the deposit required to secure the card, business secured cards are the most accessible choice. Other possibilities include increasing your credit score before applying for a card or shopping for cards that do not demand a personal guarantee.

More information: Best Business Credit Cards For Bad Credit

How to Get a Startup Business Credit Card

A business credit card is available to small firms, including startups.

It is fine to state $0 for revenue when applying for a business credit card, as is commonly the case with a startup. When evaluating whether or not to issue a business credit card, banks will consider the applicant’s various sources of income, as well as their personal credit score and previous relationship with them (a personal checking account, for example).

How Do You Get a Business Credit Card?

Seeking preapproval for business credit cards can help you assess your chances of approval, but it is not a guarantee. Nonetheless, it might be a beneficial practice, particularly if you are concerned whether your credit or business finances would be an appropriate indication of your creditworthiness.

The majority of lenders who offer preapproval or pre-qualification will have a web-based preapproval application tool. The form provided by this service will request basic financial and credit information about your company as well as your identity. You may be required to provide:

Your name, birth date, and address
Your company’s name, founding date, and industry
Your SSN (Social Security Number)
Employer Identification Number (EIN) of your company
Your personal earnings
Your company’s annual revenue
It is possible that not all information is required. An EIN, for example, could be an optional provision.

Expert Advice

If you’ve been preapproved for a credit card, don’t wait too long to apply. Changes to your credit report or credit score between the time you’re preapproved and the time you apply for a card may have an impact on your approval prospects.

If your preapproval request is declined, discover the variables that are most likely to have an impact on your creditworthiness and attempt to improve them. What is preventing your credit score from being in the “excellent” range? If you have a high credit use rate, try paying off bills before applying for a new card. If you’ve lately applied for too many credit cards, it’s better to wait at least a few months before applying for another.

How to Establish Business Credit

Building company credit is the same as building personal credit: use it and pay it off on time and in full each month. Businesses can, however, do a few more things to assist create credit.

When a firm registers and obtains an Employer Identification Number (EIN) from the IRS, it establishes a credit file for the company. The company can then open vendor accounts (for example, accounts with suppliers) that submit payment history to business credit bureaus. A D-U-N-S Number, which may be obtained from Dun & Bradstreet, a business credit reporting bureau, is another number that will help improve business credit.

Of course, one of the finest methods to build business credit is to open a business credit card. Small businesses, even startups, may be qualified for business credit cards, thus this is frequently the first step for companies trying to establish a credit history.

How Should You Use Your Business Credit Card?

To get the most out of your business card, look for one with advantages and rewards that align with your needs. By taking use of the included benefits and earning rewards on every transaction, you can turn your card into a valuable asset for your company.

Expert Advice

Business credit cards frequently include large introductory bonuses, and aligning the opening of new business credit cards with the key business transactions you make each year can result in hundreds or even thousands of dollars in incentives.

Business credit cards frequently provide beneficial introductory APRs on purchases made over a long period of time. These opportunities to finance larger equipment or supply purchases and pay them off over the course of the period without interest charges can be especially useful, but also dangerous; carry a balance past the end of the introductory period, as interest on a large balance can easily outpace any rewards earned.

How Will Business Credit Cards Look in 2023?

The Covid-19 pandemic has had a significant impact on the business travel industry, which may not fully recover until at least 2026. As a result, business credit card issuers may shift their focus away from travel benefits and toward everyday spending.

Furthermore, with the Federal Reserve hiking interest rates and credit card APRs following suit, there may be a rise in business owners seeking 0% APR offers to pay off existing debt or spread out the repayment of a significant purchase over a longer period. Buy Now, Pay Later (BNPL) programs have also grown in popularity, which may prompt business credit card issuers to sweeten their welcome bonuses in order to attract new consumers. When selecting a new business credit card, business owners should carefully analyze their possibilities.