Regardless of the size or type of business you have, the best business credit cards can provide quick capital and ease the process of managing transactions.
A business credit card is an accessible credit line for business owners.
Business credit cards and personal credit cards have similar functionalities. However, business credit cards have features that make them suitable for business rather than personal use.
A business credit card helps you build a business credit profile, which will enable you to borrow funds for your company in the future.
Whether you’re a sole proprietor or a company owner with hundreds of employees, the best business credit cards can simplify business transactions and make it easy to access funds for your enterprise.
While the specific features of every business credit card are different, here’s what you need to know to determine if one is right for you.
How do business credit cards work?
Similar to how personal credit cards work, business credit cards give users a revolving line of credit to tap into to make purchases. This line of credit allows you to charge business expenses and pay later.
Your credit limit is determined by a number of factors, including your personal credit score and, if you have one, your business credit score.
Each month you’ll receive a statement from your issuer, which includes a transaction history, your statement balance and a minimum payment amount required. If you don’t pay the balance in full by the due date, it will start to accrue interest.
Pros and cons of a business credit card
Just like any other credit card on the market, business credit cards have their fair share of benefits and downsides to keep in mind. It’s important to know how to navigate them so that you can pick the best card for your business needs.
- Better rewards, bonuses and perks for businesses
- Builds business credit
- Higher credit limit potential than a personal card
- No mixing personal and business expenses
- Easy transaction management
- Better record-keeping for tax deductions
- Exempt from Credit CARD Act protections
- Potentially higher annual fees than personal cards
- Usage can impact your personal credit
- Personal liability
What to consider before getting a business credit card
Business credit cards have other benefits that are not included in personal credit cards. When applying for a business credit card, issuers take into account the following additional elements that aren’t considered for a personal credit card:
- Eligibility is based on your personal and your business credit history. Issuers look at both your personal and business credit history to determine if you’re approved for a business credit card and what terms you qualify for. While responsible past use of credit will impact your chances the most, make sure the three main credit bureaus (Experian, TransUnion and Equifax) have accurate information, as well as business credit bureaus such as Dun & Bradstreet, Experian Business Credit and Equifax Small Business.
- You’ll need to provide information about your business. Credit card issuers may ask you for your business name and address, employer information number (EIN), when your business was started, how much revenue it generates and what type of industry you are in. As the business owner, you may also be required to provide personal information such as your household income, Social Security number and personal address.
- You may or may not be personally liable for debts. The person or entity who is liable for debts depends on what type of liability the card offers. If it has commercial liability, your business is liable for all debts. But if it has joint and several liability, you and your business are both responsible. Know your rights and responsibilities before signing on the dotted line.
- Customizable options for authorized users. With business credit cards, you can make employees authorized users and easily oversee their spending. These cards often come with customizable user privileges, so you can determine how much credit individual employees can access.
- Access to business-centric perks. Business credit cards tend to have rewards that are more suited for businesses than for individuals. Depending on the card, business owners can earn rewards at office supply stores, gas stations, restaurants and on purchases like airline tickets and technology.
- Payment terms can be tailored for businesses. Card issuers often offer business friendly payment terms like an extended payment option, which enables business owners to finance large purchases over time with different terms from those for routine purchases. However, payment terms might vary. For example, balances on business charge cards are typically due in 30 days, while balances on business credit cards aren’t due as long as you make a minimum payment.
A business credit card can make it easier to track your business expenses, get better rewards and build a business credit profile. Use your business credit card responsibly in order to maximize all the benefits that it can offer you. And last, take the time to choose a business credit card that suits your business needs.