What Is a Business Credit Card and How Do You Use One?
Business credit cards can help you manage cash flow, earn rewards and build business credit history.
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Business credit cards are great tools for managing your company’s cash flow. You can use a business card to pay an invoice, buy supplies or adapt to an emergency. Then, when revenue comes in, you can pay down your balance. Business credit cards can also offer rewards and streamline your bookkeeping.
Ready to pick a card? Here are our top choices. Read on to learn more about how business credit cards work.
What is a business credit card?
A business credit card is a revolving line of credit designed for the way companies spend money. They tend to have higher limits than personal credit cards and reward common business purchases, like advertising and software expenses.
Using a business credit card helps clearly separate your personal and business expenses. You can link a business credit card to your employer identification number (EIN), if you have one, which can help you build business credit. Business cards generally won’t impact your personal credit unless you’re delinquent.
How do business credit cards work?
In general, business credit cards work a lot like personal credit cards:
- Charge expenses to the card. Use your card when you buy something for your business. You can spend up to your credit limit, which is the maximum set by the card issuer. (In general, though, try to keep spending well below your limit.)
- Receive your statement. The issuer will send you this document every month. It includes details about everything you used your card for, along with the total amount you owe and when it’s due.
- Pay down your balance. If you can pay your entire statement before the due date, you won’t owe any interest. You have the option to carry a balance and pay it down more slowly, but that will come with interest costs. Interest rates on business cards typically range from 18% to 28%, which means they can get expensive.
- Sync your transactions with your accounting software. Most business credit cards integrate with accounting software. You should be able to export your transactions to QuickBooks or whichever tool you use. That can make it easier to close your books at the end of the month.
How do business charge cards and corporate cards work?
Charge cards and corporate cards work differently from traditional business credit cards. Here are the key differences:
| Best for | Registered businesses that want a company-wide spend management system. | Businesses with large operating budgets and strong, consistent cash flow. | All business owners, including freelancers and sole proprietors. |
| Credit limit | Fixed credit limit based on your bank balance and revenue. Limits are often higher than traditional business credit cards. | No preset spending limit. Amount you can charge fluctuates based on spending and payment patterns, among other things. | Fixed spending limit based on personal credit and income, among other factors. |
| Repayment | Billing cycles may be monthly, weekly or daily. You have to pay your balance in full every statement period. | Balance must be paid in full each month for most charge cards. Some let you carry a balance up to a set limit. | Monthly billing cycles. Minimum payment required each cycle. You can carry a balance from month-to-month, with interest. |
| Qualification requirements | Strong revenue history and bank balance, but no personal guarantee. Sole proprietors are not eligible. | Excellent personal credit; personal guarantee required. | Good or excellent personal credit; personal guarantee required. |
| Primary benefits | Employee cards with spend controls and simplified expense reporting. | Expanded purchasing power and higher rewards for higher spending. | Rewards, including cash back, points and sign-up bonuses. |
Who can get a business credit card?
Business credit cards are available to anyone who earns income outside a traditional W-2 job. That includes independent contractors, freelancers and people with side hustles.
Approval for a business card is based mainly on personal credit history. You can qualify with no revenue and minimal time in business as long as you have good-to-excellent personal credit. That’s typically a personal FICO score of at least 690.
Corporate cards are an exception. Those are usually only available to registered businesses, and approval is mostly based on your business’s financial history.
Benefits and drawbacks of business credit cards
Pros
Keep business and personal spending separate.
Earn cash back or travel points.
Get discounts and statement credits.
Bigger sign-up bonuses than personal cards.
Helps build business credit.
Interest-free financing with 0% intro APR cards.
Built-in controls to manage employee spending.
Cons
No Card Act protections. Interest rates can fluctuate and unexpected fees may apply.
Late payments can hurt personal credit.
Account holder is personally liable for unpaid debts.
Higher interest rates than most business loans, lines of credit.
Most business cards require a FICO score of 690 or higher.
How to use a business credit card
Here’s how you can get the most out of your business credit card.
1. Pay your bill on time and in full
Credit cards have higher annual percentage rates (APRs) than most other forms of business financing. If you don’t pay off your bill in full by the due date, you’ll owe interest on the remaining balance. Try to avoid paying interest whenever you can.
If you need flexible financing but consistently carry a balance, a business line of credit may be a lower interest option if you qualify.
2. Monitor your credit limit
Be mindful of how much of your credit you use. Try to keep your balance well below your credit limit so that you have plenty of credit available if you need it in a pinch. Approaching your limit may also make potential lenders worry about your business’s cash flow. That could make it difficult to access additional financing.
Your credit limit isn’t fixed forever, though. Card issuers regularly evaluate how people use their cards, and it’s common for them to increase your credit limit after your first few months of usage. But you can request a credit limit increase, too. That can reduce your credit utilization and give you access to more capital.
3. Earn and use rewards
Most business credit cards offer rewards. Start with a cash-back business credit card with extra earnings on the categories most relevant to your business, like gas or office supplies. If you don’t have specific spending patterns, a flat-rate cash-back card can rack up rewards on all your expenses.
Cash-back earnings come in the form of cash back or points. You can redeem those as a credit to lower how much you owe. Or you can transfer your points to a partner, like an airline or hotel chain.
If you or your staff travel often, you might want a travel business credit card that offers more specific rewards. Those include miles on your preferred airline, status at your preferred hotel chain, lounge access or points that can be redeemed for travel.
4. Deduct interest and annual fees on your taxes
You can deduct the expenses associated with maintaining a business credit card, including annual fees, on your business taxes. (There are plenty of no annual fee business credit cards, though.)
Plus, when you use your credit card for your business spending, it should be easy to monitor your business expenses. You can deduct those too.
5. Put limits on employee cards
Most business credit cards let you issue employee credit cards, usually for no additional fee. That can give your employees the power to make purchases on behalf of your business.
Often, you can set up controls that limit the use of these cards. You should also have clear policies around which employees can get a card and what they’re allowed to use it for.
If your company is larger and you want more advanced spending controls, explore corporate cards.
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