Business Credit Cards: How To Choose the Right One for You

business credit cards text

As a business owner, having a credit card can help you smooth cash flow, finance purchases, manage employee reimbursements, and build your business’s credit score. Plus, you may be able to earn credit card rewards or points that you can reinvest in your business. However, depending on your company’s size and structure, you can choose from different types of credit cards.

Sole proprietors can use personal or small business credit cards for work expenses because there’s no legal separation between the owner and the business. But if you form a business entity, you may need to apply for a business card under your company’s name. And larger corporations may be better matched with corporate credit cards than business credit cards, as the companies often want higher credit limits, more employee cards, and more precise reporting.

Business and corporate cards offer benefits you can’t get with personal cards—such as employee cards—and they can help you keep your personal and business expenses separate. However, as a small business owner, you’ll want to compare your options before applying for a new card.

What are business credit cards?

A business credit card is a credit card that a business, rather than an individual, applies for and uses. Cards for small businesses are called business credit cards or small business credit cards, while cards for large corporations are called corporate or commercial credit cards.

Small business credit cards vs. personal credit cards

Small business credit cards are for people who run small businesses or operate as sole proprietors. You can use these cards similarly to how you use your personal credit card, but there are important differences to consider.

The CARD Act of 2009—which introduced various consumer protections, such as limiting when card issuers can raise interest rates or how much they can charge in fees—only covers personal credit cards. Some credit card issuers voluntarily add similar terms to their small business credit cards, but not always.

Even if you have the option to use a personal credit card, small business credit cards can be attractive because they often come with useful features for businesses. For example, most business cards let you set up multiple user accounts, i.e., adding free employee cards tied to your account. You might also earn bonus rewards on common business purchases and expenses for things such as shipping, online advertising, or goods at office supply stores.

The catch is when you apply for a small business credit card you likely have to agree to a personal credit check and sign a personal guarantee. You’re also personally liable if your company defaults on the debt. Some credit card issuers report your small business credit card to consumer credit bureaus, which means the account can affect your personal credit score.

Small business cards vs. corporate cards

Corporate credit cards, also called commercial credit cards, are distinct from small business credit cards because they’re only available to larger corporations and companies. These card accounts may have much higher spending limits and more specific reporting to accommodate a large organization’s spending and accounting needs.

Card issuers’ requirements can vary for corporate cards, but you might need to have a certain number of employees, or meet minimum annual revenue or account balance requirements. For example, you might need to have at least 15 employees and either $4 million in annual revenue or $100,000 in your business bank account.

Unlike with a small business credit card, the business owner isn’t personally liable for the account. There’s generally no personal credit check required—qualifying usually depends on the company’s finances and credit. Corporate cards may offer rewards and cardholder benefits, but card issuers tend to highlight how companies can use their cards to manage and track employee expenses.

Pros and cons of business credit cards

You can use a small business credit card to manage your cash flow, earn rewards, and finance purchases. However, you could also wind up burdened with high-interest debt. Consider the following pros and cons before applying:

Advantages of business credit cards

  • Separating your purchases. A business credit card can help keep your personal and business expenses separate, giving you a clear record of your business deductions and making it easier to prepare your tax return. Maintaining this separation can be vital if you have a business entity, such as a limited liability company (LLC) or corporation.
  • Business-related rewards and benefits. Business credit cards might offer perks that better align with your business expenses than a personal credit card.
  • Managing employee spending. Giving employees a company credit card can be easier than dealing with expense reimbursement requests. You may also be able to limit how much and where your employees can use their company cards.
  • Easy and potentially interest-free financing. You can use a credit card to quickly finance purchases, and if you pay your balance in full each month, you won’t pay interest on your purchases. Some cards also offer a promotional interest-free period to new cardholders.
  • Building business credit. Card issuers may report the account to commercial credit bureaus, which can help your business establish and build business credit apart from your personal credit history.

Disadvantages of business credit cards

  • High interest rates. Credit cards tend to have higher interest rates than other types of debt, making them a poor option for long-term financing of large purchases. You may also pay a lot of interest if you carry a balance.
  • Fees. Credit cards may charge various fees, including an annual fee, employee card fees, and foreign transaction fees. Consider the rewards or benefits and how you plan to use the card to determine if the fees are worth paying.
  • Limited protections. Business credit cards might offer fewer protections than consumer credit cards, although the specifics vary depending on the issuer.

How to choose the right business credit card for your business

Many credit card issuers offer small business credit cards. Compare your options before applying. Here are a few steps you can take to home in on the best business credit cards for your company:

  • Check your personal credit. Your personal credit can affect which business credit cards you qualify for and your card’s credit limit. There are many free ways to check your credit reports and credit scores. This can give you a general idea of which cards you can get.
  • Compare fees. You can avoid most credit card fees by always paying off your balance and being mindful of how you use your card—balance transfers, cash advances, and foreign transactions may incur fees. Some cards also have annual fees. These might be worth paying if you receive more in rewards and benefits than you pay in fees.
  • Look for rewards that align with your expenses. Business credit cards may offer different types of rewards, such as cashback, frequent flier miles, reward points, or a signup bonus. The rewards you earn can depend on where you use the card and whether it offers bonus rewards on certain purchases. Review your everyday business purchases and try to find a card that offers bonus rewards for these categories.
  • Check for additional perks. Compare the other credit card benefits, such as travel insurance, employee cards, credits toward certain purchases, and expense reporting.

How to apply for a small business credit card

You can compare and apply for small business credit cards from most card issuers—you don’t need to obtain a card from your bank or credit union. To complete the application, you may need to share:

  • Your personal information. This includes your name, date of birth, contact information, income, and Social Security number (SSN).
  • Your company’s information. Such as the business’s address, the type of business, the number of employees, expected revenue, and its employer identification number (EIN). If you have a sole proprietorship, you might use your SSN instead of an EIN.

You may also need to agree to a personal credit check. If your credit reports are frozen—a safety measure that can protect you from identity fraud—temporarily unfreeze or thaw your reports before applying. Some card issuers may check your business’s credit, but they don’t need your permission to request your company’s credit reports or scores.

5 tips for using business credit cards responsibly

Managing business and personal credit cards can be similar, especially if you run a very small business. To get the most out of your card and avoid unnecessary expenses:

  1. Compare cards before applying. Eligibility requirements, rewards programs, fees, and features can vary, and it’s important to compare your options.
  2. Only use the card for business expenses. Keeping your personal and business expenses separate can limit your personal liability if you have an LLC or corporation. Even if you run a sole proprietorship, keeping expenses separate can help you avoid mistakes and save you or your accountant time preparing your tax return.
  3. Pay the balance in full each month. You generally don’t incur interest on your purchases if you pay your balance in full each month. Tracking your purchases with budgeting or accounting software can help you.
  4. Try to avoid cash advances. Even if you pay your balance in full, you may have to pay a fee and interest on cash advances right away. If you have vendors or suppliers who don’t accept credit cards, consider other types of working capital financing that might be less expensive.
  5. Compare rewards redemptions. See if there are ways to increase your rewards, such as booking travel rather than getting cash back. Points and miles blogs often have guides to different cards and programs.

Business credit cards FAQ

What is a business credit card?

A business credit card is a credit card for a business rather than an individual. Small-business credit cards often have business-specific features, such as employee cards and incentives for business-related purchases. Still, they resemble personal credit cards, and qualifying can depend on your personal credit and a promise to repay the debt.

Can I use a personal credit card for my business?

If you run a sole proprietorship, you could use a personal credit card for your business purchases. However, using different cards for your business and personal expenses can make tracking and reporting your business expenses easier.

How can a business credit card affect personal credit?

A business credit card might affect your personal credit the same way as a personal credit card, but only if the card issuer reports the card to consumer credit bureaus. Policies vary, but you can ask the issuer before applying. A business credit card could also hurt your personal credit if you fall behind on payments and the account is sent to a collections service.

Do business credit cards have the same protections as personal credit cards?

Business credit cards don’t have to offer the same protections as personal credit cards because the CARD Act of 2009 only applies to consumer credit cards. However, some business credit card issuers voluntarily add some of the same protections to their small business cards.