What Is a Business Credit Card?
A business credit card is designed specifically for business use, rather than personal expenses. So, for instance, you might use a business credit card to pay for:
- Office supplies.
- Computer equipment.
- Business travel.
- Client dinners.
- Utilities, internet, and/or cell phone service for the business.
Business credit cards can be helpful for businesses of all sizes. So whether you’re a sole proprietor, a freelancer, or the owner of a small business with dozens of employees, you could take advantage of a business credit card.
There are 2 types of business credit cards available: revolving cards and charge cards.
A revolving business credit card has a revolving credit limit you can use for purchases. As you make new purchases, your available credit shrinks. As you pay down the balance, that frees up the available credit. With a revolving card, you have the option to pay in full each month or carry a balance if needed.
Charge cards are a little different. With a charge card, you may have a fixed spending limit or your card may have no preset spending limit. No preset spending limit on a business charge card means that your limit can change from month to month, based on your account activity, credit rating, and financials.
With a charge card, you don’t have the option to carry a balance. You’re required to pay in full every month unless the card offers special extended payment terms. The upside of paying your balance in full, however, is that no interest accrues on the things you charge.
Business Credit Cards vs. Personal Credit Cards
Aside from being designed for business spending, some other characteristics distinguish business credit cards from personal credit cards.
1. Credit Reporting
To apply for a business credit card, you’ll need to provide your Social Security number. Some card issuers may allow you to apply with your federal Employer Identification Number (EIN) instead, though it’s less common.
Qualifying for a business credit card is based on your personal credit history, among other criteria. But once your account is open, your payment activity, credit limit, and other account details are reported as part of your business credit history.
Defaulting on a business credit card account can negatively affect your business credit history. Most card issuers require you to sign a personal guarantee for business credit cards. This guarantee makes you personally liable for any debt incurred. If you default, the card issuer could report your negative account history on your personal credit report.
2. Card Protections
Various federal protections cover personal credit cards, including those outlined in the 2009 CARD Act. For example, federal law limits consumers’ personal financial liability for fraudulent purchases made with their credit cards.
Those same protections don’t automatically extend to business credit cards. If your business credit card is stolen, you could be held responsible for any charges resulting from the theft. The good news is that some business credit card issuers do limit fraud liability for cardholders.
Many business credit cards allow you to earn rewards on eligible purchases. That in itself isn’t much different from personal cards. Where the 2 diverge is in which purchases can earn rewards.
For example, you may have a personal credit card that pays you cash back at grocery stores while business credit cards may pay cash back at office supply stores instead. Rewards programs cater to those expenses most often incurred by businesses, not individuals.
4. Spending Limits
Business credit cards can offer more purchasing power compared to a personal credit card. Where you might have a $10,000 limit on a personal card, your business card might bump that up to $50,000 or more, depending on your credit and business financials. The higher spending limits reflect the greater purchasing needs of businesses.
Pros of Business Credit Cards
There are several good reasons to consider opening a business credit card if you’re not using one yet:
- It may be easier to get approved for a business credit card, compared to a business loan.
- It’s possible to qualify for a card even if you haven’t started your business yet.
- Business credit cards offer flexibility since you can choose to carry a balance or pay in full.
- Earning miles, points, or cash back on purchases can save your business money.
- It can be an easy way to keep track of business expenses.
- You can build a business credit score, which could help you qualify for loans or other lines of credit.
- No collateral is needed for unsecured business credit cards.
- Interest rates may be lower compared to other types of business financing, such as a merchant cash advance or invoice factoring.
- Interest paid on your card balance may be tax-deductible.
- You can use your card to meet a variety of spending needs.
Cons of Business Credit Cards
On the other hand, there are potential drawbacks to consider:
- Some business credit cards charge an annual fee and/or foreign transaction fee.
- You’ll need good to excellent credit to qualify for the lowest APR.
- Your credit limit may be less than what you’d qualify to borrow with a loan.
- Signing a personal guarantee makes you personally responsible for business credit card debt.
Choosing the Best Card for Your Business
If you think opening a business credit card account is the right move, the next step is choosing a card. When considering card options, there are a few important things to keep in mind.
1. Card Use
First, think about what you primarily need a business credit card to do for you. For example, are you mainly looking for a way to earn rewards, or do you need a card to cover the occasional cash flow shortfall? Or are you looking for a card that can help you establish and build positive business credit history?
What you plan and need to use the card for can help you narrow down your choices as you shop around.
If rewards are on your list of credit card must-haves, consider which kind of rewards would be most valuable to you.
Earning cash back could be good if you want to apply rewards as a statement credit. You may prefer to earn miles or travel points, however, if you take frequent business trips.
Aside from the type of rewards you might earn with a business credit card, factor in how different rewards programs are structured.
Some cards, for instance, offer a flat number of miles, points, or cash back on everything you spend. Other cards offer tiered rewards in multiple categories.
For example, you might earn 3 miles per dollar on travel purchases, 2 miles per dollar on dining and entertainment, and 1 mile per dollar on everything else.
That type of rewards program could work in your favor if you spend more heavily on certain business expenses than others. One thing to watch out for with tiered rewards is a spending cap. Your card might limit you to earning a higher rewards rate up to a certain dollar amount each year.
Keeping the bottom line healthy is always important, and while you may be earning money-saving rewards with a business credit card, you have to weigh their value against the card’s cost.
As you compare cards, look at:
- Annual fees.
- Foreign transaction fees.
- Balance transfer fees if you’re planning on transferring a balance to the card.
- Promotional APR.
- Regular purchase APR.
- Balance transfer APR.
- Penalty fees and APR.
As a general rule of thumb, the better a card’s rewards program or the more generous the perks, the higher the annual fee tends to be.
4. Card Extras
Rewards and cost matter, but don’t overlook any additional benefits a business credit card may offer.
Say you’re interested in a travel card. One that offers perks such as free checked bags, travel insurance, complimentary business lounge access, and free WiFi might be even more valuable in your eyes if you take frequent business trips.
On the other hand, benefits such as cell phone insurance or extended warranty protections may be more appropriate if you need a cash back card to cover everyday spending. Just like with rewards, measure the value of any added benefits against the card’s cost.
5. Payment Options
Last but not least, consider carefully whether you should apply for a business charge card or a revolving credit card that allows you to carry a balance.
Avoiding interest charges is always good if you want to save your business money. The caveat is being certain that your business will be able to pay off what you’ve charged in full each month.
If you’re still working to establish a newer business, your cash flow might not be consistent yet. In that scenario, you may be better off with a revolving limit card to start so that you have the option to pay over time if needed.
Best Business Credit Cards for Travel
Business credit cards aren’t all alike, and what works for one business owner may not be right for another. With that in mind, these cards are top picks for charging business travel:
Best Flat-Rate Rewards Card: Capital One Spark® Miles
The Capital One Spark® Miles card earns 2 miles per dollar on every purchase, with no cap on the number of miles you can earn. There are no blackout dates or restrictions for redeeming miles. You can apply them as a statement credit, with no minimum number of miles required.
You can add employee cards to your account for free to rack up more miles. The card also offers an introductory bonus of 50,000 miles, which is equal to $500 in travel statement credit. You’ll need to spend $4,500 in eligible purchases within the first 3 months after account opening to qualify.
This card does have a $95 annual fee, but you’ll pay a $0 introductory annual fee the first year. And you don’t have to worry about foreign transaction fees for purchases made outside the US.
Best Travel Card With No Annual Fee: Bank of America Business Advantage Travel Rewards World Mastercard® credit card
The Bank of America Business Advantage Travel Rewards World Mastercard® credit card is a great choice if you want a business travel card with no annual fee.
This card earns unlimited 1.5 points per dollar on every purchase, with no spending cap. When you book travel expenses through the Bank of America Travel Center, you’ll earn 3 points per dollar on those purchases.
You can earn even more points toward travel if you’re a Bank of America business banking customer. Bank of America Preferred Rewards members can earn up to 75% more points on every purchase.
Other card benefits include no foreign transaction fee, a 0% introductory APR on purchases for the first 9 billing cycles, and an introductory 25,000-point bonus when you make $1,000 in net purchases within the first 60 days of account opening.
Best Premium Business Travel Card: Business Platinum Card From American Express
You might prefer the Business Platinum Card from American Express if you like to travel for business in comfort.
This premium card has a hefty $595 annual fee, but in exchange, you get luxury perks such as:
- Fee credit for Global Entry or TSA Pre✔.
- $200 annual airline fee credit.
- One year of WeWork Platinum Global Access.
- Hilton Honors Gold Status.
- Marriott Bonvoy Gold Elite Status.
- Access to The Hotel Collection.
- Access to more than 1,200 airport lounges worldwide.
- 35% rewards bonus when you Pay With Points for eligible airfare.
Speaking of rewards, you’ll earn 5 Membership Rewards points per dollar on flights and prepaid hotels on amextravel.com. You’ll also earn 1.5 points per dollar on eligible purchases of $5,000 or more—up to 1 million additional points per year. If you hit that threshold, you’ll continue earning 1 point per dollar on eligible purchases.
Best Business Credit Cards for Cash Back
If you prefer cash back to travel miles or points, consider what these cards have to offer:
Best Flat-Rate Cash Back Card: Spark® Cash from Capital One®
Spark® Cash from Capital One® offers unlimited 2% cash back on every purchase for the business owner who likes to keep rewards simple.
This card has a $0 introductory annual fee, then $95 each year after. Cash can be redeemed for statement credit, with no minimum threshold required. Employee cards are free, and you can earn a one-time $500 cash bonus when you spend $4,500 within the first 3 months of opening your account.
Best for Heavy Spenders: Chase Ink Business Cash Credit Card
The Chase Ink Business Cash card features tiered rewards, with members earning:
- 5% cash back on the first $25,000 in combined purchases at office supply stores and on internet, cable, and phone services each anniversary year.
- 2% cash back on the first $25,000 in combined purchases at gas stations and restaurants each anniversary year.
- Unlimited 1% cash back on all other purchases.
Rewards can be redeemed for cash back as a statement credit or bank deposit, gift cards, travel, and purchases at the Apple Ultimate Rewards Store. The card has a $0 annual fee but charges a 3% foreign transaction fee.
Best No Annual Fee Cash Back Option: American Express Blue Business Cash Card
With the Blue Business CashTM Card from American Express, you’ll pay no annual fee to earn cash back. The rewards structure is simple. You’ll earn 2% cash back on up to the first $50,000 in purchases each calendar year, then 1% afterward. All cash back earned is automatically credited to your statement.
As a bonus, this card allows you to spend above your credit limit and still earn cash back on those purchases. There are no overlimit fees, and you don’t have to call ahead to spend over your limit. Keep in mind, however, that the amount you can spend over your limit is based on your payment history, card use, and credit.
Best Practices for Using a Credit Card for Your Business
Once you have a business credit card, be sure to use it wisely. Pay your bill on time each month and in full whenever possible to avoid interest charges. Redeem rewards strategically to get the most value and establish a business card policy before handing them out to employees. Lastly, maintain good records of what you spend with your card so you have a go-to reference for claiming those expenses as deductions at tax time.