How To Choose a Business Credit Card
When choosing a business credit card, look beyond just the interest rate or cool rewards. The right card should fit your company's spending habits, cash flow and financial goals. Here's a breakdown of the key factors to consider.
Takeaways: Choose a Credit Card Based on Your Business Needs and Card Requirements
- The right business credit card1 is the one that matches the needs of your specific business — whether you're seeking a low APR, rewards for spending or high credit limits.
- When considering cards, research requirements to qualify, taking into account your credit score, business revenue and any credit union membership requirements2
- Think about how much time you'll need to manage fine-print details or terms, and whether the card has options to help you manage business expenses and reach business goals.
When used effectively, the right business credit card can be a valuable tool for managing business expenses and building credit. With some cards, you can also earn rewards and enjoy higher future credit limits. Some financial institutions also offer protections like zero fraud liability on their business credit cards.
Consider Your Credit Card Goals From Business Cash Flow to Rewards
Business owners have many reasons for getting a business credit card. Do you want to earn a new-card bonus to offset business expenses? Get cash back or rewards on everyday business purchases? Simplify the separation of personal versus business spending?
Here are other reasons to get a business credit card:
- Business management: Manage and track employee purchases, business expenses and cash flow, and build business credit history.
- Access to credit: Finance and purchase business supplies and equipment or emergencies.
- Rewards: Earn rewards or cash back to offset brick-and-mortar business expenses, business travel and more.
As you weigh options, you'll also need to consider your own credit history — some cards require a good-to-excellent history. New businesses or individuals with limited credit may need to establish a credit history first.
To get business credit, you'll also typically need to demonstrate whether your business has strong cash flow. Think about how much you spend each month or over several months. Some card bonuses don't kick in until you've reached a very high threshold. Others are more modest.
Here are some features many entrepreneurs and small business owners seek in a business credit card.
1. Rewards, Bonuses and Benefits
If you're interested in offsetting your business spending with business rewards, here are a few to consider.
- Flat cash back: These cards offer a percentage of cash back on eligible purchases, making them ideal for simplicity and predictable savings, without worrying about missing out on rewards. For example, BECU's business credit card offers 1.5% back on every qualifying purchase and automatically adds the credit to the account without any extra required steps to redeem rewards.
- Category cash back: These cards offer different cash-back percentages depending on common business categories such as shipping, cell phone bills, internet and online advertising. Look for a card with rewards that align with your primary everyday expenses, such as office supplies or travel.
- Points/miles rewards: These cards are primarily from hotels, airlines and travel-themed cards, targeting business travelers and rewarding them with points or miles redeemable for flights, hotels or gift cards.
On top of that, cards can offer the following:
- Sign-up bonuses: Generous introductory cash or points bonuses if you meet a spending threshold in the first few months. Some require very high spending over several months.
- Perks: Business credit card perks can include rental car coverage (PDF) for damages, purchase protection, extended warranties and global travel insurance, among others.
However, many of these rewards and perks are only helpful if you actually use them, and if they don't take up valuable time to manage.
2. Manageable Annual Fees
A good business credit card fee strategy helps improve business finances and reduce expenses. Here's the downside — cards that offer more generous points, miles and sign-up bonuses also tend to have hefty annual fees. Fees can run up to $500 or more, so it's essential to compare those costs and the most likely uses for your business.
Some business credit cards, like BECU's, focus on keeping costs predictable by offering no annual fee and fewer penalty or transaction fees. Check the financial institution's business credit card disclosures to understand which fees may apply.
3. Low APR
A low-APR business card could be helpful if you plan to carry a balance and want to pay less in interest. Even if you plan to pay in full every month, a lower-rate card could provide flexibility if expenses stack up one month.
While some cards advertise introductory 0% APR offers, others prioritize competitive ongoing rates tied to the prime rate, which can matter more if you expect to carry a balance beyond a short promotional period.
For example, if your business is just getting started, perhaps you're planning to regularly have a balance on your credit card as you manage cash flow or need a cash advance. The top reason new startups fail is due to running out of cash or lacking business capital, according to CB Insights.
4. The Chance To Build Business Credit
A credit card can help establish or build your business credit, especially if you have a new business or limited credit now. Credit scores are calculated based on payment history, credit utilization and other factors.
In the future, financial institutions, business partners and insurance companies will review your business credit. Good credit can help you:
- Get lower rates and terms on business loans.
- Improve terms and rates with vendors and suppliers.
- Better your customer bids and contracts.
Choose a card that reports to one of the three main business credit bureaus to help you build your business credit profile.
If you're rebuilding your credit, a secured business card could be a possible solution — these require a cash deposit, which is used as collateral if you don't pay off your credit card borrowing. In the meantime, monitor business credit reports and scores to identify areas for improvement.
5. Provides Business Finance Management Tools and Integrations
A card dedicated to business expenses only can help keep business and personal finances separate. Instead of using your personal credit card to buy merchandise or pay suppliers, you'll use your business card.
Some cards offer apps and tools that help with business expense management, such as automatic receipt capture or expense categorization. Not all business credit cards offer integration with expense management software or built-in accounting platforms, but many provide core tools like employee cards, spending limits and online account management to help track expenses.
Many business credit cards allow you to download transactions in formats compatible with accounting software like QuickBooks, Quicken and Excel, making it easier to track expenses and reconcile accounts.
Business credit cards will typically allow you to add employee cards, enabling you to set limits, receive real-time alerts, monitor transactions and get detailed reporting.
Depending on how you set up your employee business cards (PDF), employee cards can maximize your cash-back earning potential. Setting credit limits can help prevent overspending. You'll be able to monitor and track expenses using online banking or mobile banking.
6. Security and Support
If you're looking for fraud protection, such as when your business makes purchases online, consider looking for a business credit card with zero liability policies. Zero liability protection is a regulatory requirement for individual consumer credit cards, but not for business cards.
Some cards offer extensive customer support or are accepted by more businesses. For example, the well-recognized VISA will be accepted by most merchants for your business purchases.
7. Scalability for Business
Consider how well the card will support your growing business needs, whether you're running a business with employees or on your own.
For example, find out whether the issuer offers credit limit increases down the road. Some business credit cards offer flexible credit limits that can be adjusted according to business needs. Some cards may offer very high credit limits, while others do not.
Critical To Remember: Your Business Eligibility and Cash Flow
The right credit card for you will depend on your credit history and business needs. If you have a poor credit record, you may not yet qualify for the business card you want.
Your personal credit score and history will be checked, your income verified, and you're personally liable for unpaid balances, even if the card is used for business expenses.
Many card issuers require a personal guarantee, which means you're still held personally financially responsible for company debt.
Business credit cards often require an employer identification number (EIN) and a business bank account. Credit card issuers may also consider factors such as business revenue, credit history and industry when evaluating eligibility.
Choosing the Best Business Credit Cards
Compare business credit cards from multiple issuers to find the best fit for business needs. Generally, the best business credit cards offer a combination of rewards, low fees, reasonable interest rates and flexible credit limits.
Look for introductory offers or bonus rewards that allow you to earn cash and consider cards with flexible rewards programs that align with your business expenses, such as cash back or travel points.
If you're a new business owner, you may also look for a low-stress card with fewer hassles when using these points and miles, and that offers tools to track spending and manage your business's financial health. Building business credit scores and your business credit file will take time, particularly if you have a limited credit history. Review business credit card options carefully to build future credit access.
Comparing options carefully can help you choose a card that supports your business today and as it grows.
FAQs
How Do I Choose the Best Business Credit Card?
The best business card is the one that best fits your credit profile, credit history and your goals for the card. The best business card for your business might be one that easily separates business and personal spending, earns cash back or offers flexible credit limits. When considering cards, ask yourself: How is my credit? How do I plan to use the card? Will I carry a balance every month or pay in full? Do I need employee cards or security protection for purchases?
What Is a Business Credit Report?
A business credit report contains the company's financial background, payment history on credit accounts, inquiries for new credit, legal filings (including collections and bankruptcies) and credit score, much like a personal credit profile.
How Do I Get a Small Business Credit Card?
Here are some things to know beforehand:
- Review the card issuer's guidelines and rules for their business credit card.
- Collect the requested information, such as your gross revenue and updated registration with your Secretary of State's office or your state's registry requirement for your business.
- Carry out a personal credit check to review your current credit history.
- Carefully fill out the issuer's application.
- Be available to answer any questions or provide documentation if requested.
Does My Small Business Need a Credit Card?
You may need a credit card as a simple way to keep business and personal accounts separate, or to build a positive credit history for future expansion.
The above article is intended to provide generalized financial information designed to educate a broad segment of the public; it does not give personalized financial, tax, investment, legal, or other business and professional advice. Before taking any action, you should always seek the assistance of a professional who knows your particular situation when making financial, legal, tax, investment, or any other business and professional decisions that affect you and/or your business.
1 Rates and financing offered are based on applicant's credit qualifications and other underwriting criteria. Fees may apply. Lending programs, including rates and terms, are subject to change without notice. This loan program is for business purposes and commercial loans only. Certain conditions and limitations apply. Not every applicant will qualify.
2 Establishing business membership requires a Business Member Share savings account to be opened and maintained; not all applicants will qualify.
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Lora Shinn
Contributor