Should You Open a Business Credit Card—Yes or No?

Business credit cards can be an excellent tool to finance your small business. 

But should you open a new business credit card? Is now the right time? Would it be better to wait or look for other forms of financing?

In this article, we’ll cover when you should (and shouldn’t) apply for a business credit card, the benefits of doing so, and how you can prepare to apply.

Why get a business credit card?

The short answer: Because it allows you to reap cash rewards, travel, hospitality, and dining benefits, and future credit priorities simply by spending money you were going to spend anyway.

Now, that is assuming you have certain elements in place (which we’ll touch on later). 

In most cases, though, a credit card can help you manage day-to-day expenses while boosting your working capital.

Benefits Of Business Credit Cards

Regardless of the size of your business, there are many benefits to having and using a business credit card.

1. Higher spending limits

Many business cards have credit limits of $50,000 or more—typically much more than what you’ll get with a personal credit card.

Large costs can arise unexpectedly—having a high spending limit means you’re ready for those costs when they come.

2. Business perks and rewards

Many creditors offer attractive perks that can help you pay for travel expenses and business supplies, while earning cash back and potentially building airline miles.

Different business cards offer different reward packages, so do your research before applying. Some cards cater rewards more towards travel, while others will cater more towards ongoing business expenses or cash-back rewards.

3. Separate and categorize expenses

Many business credit cards offer detailed monthly and quarterly expense tracking. This saves a significant amount of time during tax season.

Instead of pouring through receipts to organize and categorize expenditures, you’ll be able to rely on credit statements for easier spend tracking, by category.

You can also separate your personal and business expenses, which makes for easier tracking, but also protects your personal assets from creditors.

4. Boost and build your credit score

As with any credit card, when you make payments on time, your credit rating improves quickly. 

Building business credit is crucial to qualifying for better rates and terms on business loans. The better the credit score, the better the loan offers you’ll receive.

Whether you have no credit, bad credit, or good credit, using a business credit card can help you continue to build a more positive credit profile and boost your credit score.

5. Monitor employee spending

Most business credit cards allow you to issue employee cards with limits (that you set).

This allows you to delegate spending processes and approvals more easily while monitoring how your team is using their employee cards.

What is a business credit card used for?

You can use a business credit card to finance just about any business-related expense. Typically, business cards are best suited for ongoing, necessary expenses, (hopefully) not too large in size.

For example, you could use your card to:

• Finance inventory or equipment
• Invest in marketing
• Take clients out to lunch
• Pay for flights and event expenses

When NOT to get a business credit card

1. To pay off another credit card

You don’t want to secure a credit card to pay off another credit card—that’s a recipe for disaster. 

Only apply for a business credit card if you have the means to pay it off every month. 

Extra working capital is excellent for your business, but it can cause a major catastrophe if you begin piling on the credit card interest.

2. To make a large one-time purchase

If you need funds for a big one-time investment, it’s better to use other financing options like a term loan, a line of credit, or equipment financing. 

Your credit score will be negatively impacted if you continue to use the majority of your credit limit, demonstrating to lenders that you’re operating to the extent of your means.

Credit cards are great for taking care of small, ongoing expenses. There may be times where you need to use credit to cover unexpected costs, but ideally when you have an established card already. We do not recommend applying for a business credit card if your sole purpose is to cover a large one-time payment.

How to apply for a business credit card

The application process for a business credit card is similar to applying for a personal credit card—you’ll just need a bit of extra information to describe your business.

What do you need to apply?

• A good credit score—while not completely necessary—is certainly beneficial. If you still haven’t formulated how you plan to use your business credit card, you may benefit from using a personal card in the interim to build your credit score before applying.
• Proof of identity. Prepare to present your social security number or Taxpayer Identification Number (TIN).
• Personal information: Name, address, date of birth, income, and other general information will be required.
• Business information: Business type, industry, time in business, contact info, company size, balance sheet data (revenue and expenses), and tax information (if different from personal).

When should you apply?

There’s no one-size-fits-all all answer to this question, but generally, you want to be in one or multiple of the following situations before you consider applying for a new business credit card:

• You have predictable revenue
• You have consistent spending plans
• Expenses are in control
• Your personal credit is better than fair

What to consider when applying for your business credit card

Different cards have varying annual fees, interest rates, credit limits, and eligibility requirements—it’s best to do your homework before choosing one.

Here are a few important elements to consider when evaluating your options:

• Bonuses and Rewards: Many of the best credit cards offer introductory interest-free periods and ongoing rewards. You can earn everything from cash back to free flyer miles. Choose a card with easy-to-use rewards—if you’re not planning on doing any travel soon, look for cards that offer cash-back rewards, software discounts, or expense benefits on food and other necessities.
• Annual Percentage Rate (APR): The card’s APR shows how much you’ll owe if you carry a balance past the payment period. 
• Minimum Payment: If you can’t pay off your card’s balance each month, you’ll need to make at least the minimum payment. This minimum could be a fixed amount or a percentage of the remaining balance.
• Foreign Transaction Fee: If you’re using your card abroad, you’ll have to pay foreign transaction fees. These are usually around 2–3%, but some credit card issuers will sneak in higher rates—so do your research if you plan to travel.

So should you open a new business credit card? It depends. If you need additional working capital and can pay off your cards each month responsibly, then by all means—go right ahead. However, if you’re looking for another business credit card to help with your current debt issues, it’s best to look for a fix elsewhere.

If you choose to open a new business card, let us help. Fill out our 15-minute application to access card offers. You’ll get to see which cards you qualify for before choosing the one you need.After choosing your card, you can get approved the same day. Get started now.