Business credit cards are financial tools designed to help businesses manage their expenses, access credit when needed, and take advantage of rewards and benefits. They come in a variety of forms, each catering to specific business needs. In this guide, we’ll discuss the different types of business credit cards, what to look for in a business credit card, and how to make an informed decision.
Types of Business Credit Cards
Before delving into the best business credit cards available, it’s essential to understand the various types of business credit cards and their unique features. Here are some common categories:
1. Cash Back Business Credit Cards
Cash back business credit cards are a popular choice for many small business owners. These cards typically offer cash back rewards on purchases, making it easy to earn money back on everyday expenses. Cash back percentages may vary, but they often range from 1% to 5% on eligible purchases.
2. Travel Business Credit Cards
Travel business credit cards are tailored for businesses with frequent travel expenses. They offer rewards like airline miles, hotel points, and travel insurance. These cards can provide significant savings for companies that frequently send employees on trips.
3. Rewards Business Credit Cards
Rewards business credit cards come in various forms, offering points or miles for every dollar spent. These points can be redeemed for a variety of rewards, including merchandise, gift cards, and even cash back.
4. Small Business Credit Cards
Designed specifically for small businesses, these cards often come with features like low or no annual fees, introductory 0% APR offers, and customizable credit limits.
5. Corporate Credit Cards
Corporate credit cards are typically used by larger organizations. They offer advanced expense management tools, high credit limits, and customizable reporting features to help businesses streamline their operations.
6. Charge Cards
Charge cards are similar to credit cards but require the cardholder to pay the balance in full each month. They do not have a preset spending limit, which can be advantageous for businesses with fluctuating expenses.
What to Look for in a Business Credit Card
Choosing the best business credit card for your needs requires careful consideration. Here are some essential factors to consider:
Credit Limit:
Consider your business’s financial needs and look for a card with a credit limit that suits your spending requirements.
Annual Fees:
Pay attention to the annual fees associated with the card. Some business credit cards have no annual fees, while others may charge several hundred dollars annually.
Interest Rates:
Examine the card’s APR (Annual Percentage Rate). Lower APRs can save you money if you occasionally carry a balance, but many business credit card users pay their balances in full each month.
Rewards and Benefits:
Determine what rewards and benefits are most important to your business. If you frequently travel, a card with travel rewards may be the best choice. If you prefer cash back, look for a cash back card.
Introductory Offers:
Some cards offer attractive introductory offers, such as 0% APR for the first few months or a substantial bonus for spending a certain amount within the first few months.
Expense Management Tools:
Consider the tools the card provides for expense management, such as customizable spending limits and detailed reporting.
Additional Features:
Look for additional features like purchase protection, extended warranties, and travel insurance that can provide extra value.
The Best Business Credit Cards
In this section, we will delve into some of the best business credit cards available in the market, offering insights into their features, benefits, and drawbacks. Please note that the suitability of a particular card may vary based on your business’s specific needs and preferences.
American Express Business Platinum Card
The American Express Business Platinum Card is a premium option for businesses that require extensive travel benefits and exclusive perks. Here are some key features of this card:
Welcome Offer: The card offers a substantial welcome bonus of Membership Rewards points if you spend a certain amount within the first few months.
Airport Lounge Access: Enjoy access to the American Express Global Lounge Collection, which includes Centurion Lounges, Delta Sky Club, and more.
Travel Benefits: Receive a statement credit for TSA PreCheck or Global Entry, a complimentary Priority Pass Select membership, and elite status with various hotel and car rental loyalty programs.
Flexible Rewards: Earn Membership Rewards points that can be redeemed for travel, merchandise, or transferred to airline and hotel partners.
Annual Fee: The card comes with a high annual fee, which may not be suitable for all businesses.
Chase Ink Business Preferred Credit Card
The Chase Ink Business Preferred Credit Card is an excellent choice for businesses looking to earn valuable rewards on various spending categories. Here’s what you need to know:
Sign-Up Bonus: The card offers a generous sign-up bonus when you meet the minimum spending requirement within the first few months.
Reward Earning: Earn triple points on travel, shipping, advertising, and internet/cable/phone services. This makes it a versatile option for businesses with diverse spending.
Travel Protection: Enjoy valuable travel protection benefits, including trip cancellation and interruption insurance, primary rental car coverage, and cell phone protection.
Transfer Partners: The card allows you to transfer points to popular airline and hotel loyalty programs, providing flexibility in using your rewards.
Annual Fee: While the annual fee is reasonable, some businesses may find it a bit steep.
Capital One Spark Cash Plus
The Capital One Spark Cash Plus is an ideal choice for businesses that prefer straightforward cash back rewards and unlimited earning potential. Key features include:
Unlimited Cash Back: Earn a flat 2% cash back on all purchases, making it simple and rewarding for businesses that don’t want to worry about category bonuses.
Welcome Bonus: The card offers a generous cash bonus when you meet the spending requirement within the first few months.
No Foreign Transaction Fees: For businesses with international expenses, this card is a cost-effective choice as it doesn’t charge foreign transaction fees.
Annual Fee: While the annual fee is reasonable, businesses with limited expenses may find it less appealing.
FAQs about Business Credit Cards
A business credit card offers several benefits, including easy expense tracking, access to credit for business needs, rewards and perks, and the opportunity to build business credit.
While you can use a personal credit card for business expenses, it’s generally advisable to have a dedicated business credit card to keep personal and business finances separate.
To choose the best business credit card, consider factors like your business’s spending habits, the type of rewards you prefer, annual fees, and any additional benefits that align with your needs.
Business credit card expenses are typically tax-deductible, making it easier to track and report your business expenses for tax purposes.
Yes, there are business credit cards available with no annual fees. These cards can be a good choice for businesses looking to minimize costs.
The Application Process and Eligibility
One of the first steps in obtaining a business credit card is the application process. The eligibility criteria and the application procedure can vary from one card issuer to another, but there are some common steps and requirements to keep in mind:
Eligibility Criteria:
Business credit cards are typically designed for businesses, so you’ll need to have a legitimate business entity to qualify. This can be a sole proprietorship, partnership, corporation, or other business structure. Some card issuers also offer business credit cards for freelancers or self-employed individuals.
Documentation:
When applying for a business credit card, you may be required to provide certain documentation to verify your business’s legitimacy. This can include business registration documents, tax identification numbers, financial statements, and sometimes even a business plan.
Personal Credit Score:
In many cases, especially for small businesses and sole proprietors, your personal credit score plays a significant role in the approval process. Card issuers will review your credit history to assess your creditworthiness. A good personal credit score can increase your chances of approval and help you qualify for better terms and rewards.
Business Credit History:
If your business has been in operation for some time, it may have its credit history. Some card issuers will consider your business’s credit history in addition to your personal credit score. If your business credit is strong, it can open doors to better credit card options.
Annual Revenue:
The revenue or income of your business can be a key factor in the approval process. Card issuers may have specific revenue requirements for certain cards. Make sure you meet these requirements or look for cards that align with your business’s revenue level.
Personal Guarantee:
Many business credit cards require a personal guarantee, especially for small businesses and startups. This means that as the cardholder, you are personally responsible for the card’s debt. While a personal guarantee can be a barrier to some, it’s often necessary for businesses with limited credit history.
Online Application:
Most card issuers offer an online application process, which can be convenient and straightforward. You’ll typically need to provide personal and business information, including your social security number, business details, and financial information.
Approval Process:
Once you submit your application, the card issuer will review it and assess your eligibility. This process can take a few days to a few weeks, depending on the issuer’s policies. In some cases, you may be required to provide additional information or documentation.
Credit Limit:
Upon approval, the card issuer will determine your credit limit based on various factors, including your creditworthiness and the information you provided in your application. A higher credit limit can provide your business with more financial flexibility.
Card Activation:
After receiving your business credit card, you’ll need to activate it before you can start using it. This typically involves calling a provided phone number or activating it through the issuer’s online portal.
Usage and Management:
Once your card is activated, you can start using it for business expenses. Many card issuers provide online account management tools, allowing you to track expenses, set spending limits for employees, and monitor your account easily.
Building Business Credit
Building a strong credit profile for your business is an important step in ensuring you can access the best business credit cards with favorable terms and rewards. Here are some strategies for building and improving your business credit:
1. Open a Business Bank Account:
Separate your business finances from personal finances by opening a dedicated business bank account. This helps establish your business as a distinct entity and can be important for building business credit.
2. Obtain a Tax Identification Number (TIN):
A TIN, also known as an Employer Identification Number (EIN), is a unique identifier for your business. It’s essential for tax purposes and can help build your business credit profile.
3. Pay Bills Promptly:
Consistently paying your business bills and expenses on time is crucial for building a positive credit history. This includes paying vendors, suppliers, and any outstanding business loans or credit accounts.
4. Monitor Your Business Credit Report:
Just as with personal credit, your business has a credit report that tracks your financial activity. Regularly review your business credit report to ensure accuracy and address any discrepancies promptly.
5. Establish Trade Credit:
Work with vendors and suppliers who report your payment history to business credit bureaus. Positive trade credit relationships can boost your credit profile.
6. Apply for a Business Credit Card:
Using a business credit card responsibly can positively impact your business credit score. Make timely payments and keep your credit utilization low.
7. Maintain a Good Personal Credit Score:
As mentioned earlier, many business credit card issuers consider your personal credit score. Maintaining a strong personal credit score can open doors to better business credit card options.
8. Manage Your Debt:
Avoid carrying high balances on your business credit cards. Pay down your balances to demonstrate responsible credit management.
9. Gradually Increase Credit Lines:
As your business credit improves, request credit line increases on your existing business credit cards. This can improve your credit utilization ratio.
10. Seek Professional Advice:
If you’re unsure about the best strategies for building business credit, consider seeking advice from a financial advisor or credit specialist who specializes in business credit.
Maximizing Rewards and Benefits
Once you have your business credit card, the next step is to make the most of its rewards and benefits. Here are some strategies to maximize the value of your business credit card:
1. Understand the Rewards Program:
Familiarize yourself with the specific rewards program associated with your card. Know how points or cash back are earned and how they can be redeemed.
2. Leverage Bonus Categories:
Many business credit cards offer bonus rewards in specific spending categories. Pay attention to these categories and tailor your spending to maximize rewards. For example, if your card offers extra points for advertising expenses, allocate more of your budget to advertising.
3. Meet Sign-Up Bonus Requirements:
If your card has a sign-up bonus, make an effort to meet the spending requirements within the specified timeframe. This can result in a substantial initial reward.
4. Use Employee Cards Wisely:
If your business credit card allows you to issue employee cards, do so strategically. You can earn rewards on their spending while also maintaining control and tracking their expenses.
5. Pay Your Balance in Full:
To avoid paying interest, make it a practice to pay your balance in full each month. This way, you can fully benefit from the rewards without incurring additional costs.
6. Redeem Rewards Strategically:
When redeeming your rewards, consider the most valuable options. For example, transferring points to airline or hotel loyalty programs can often yield higher redemption value than cash back.
7. Monitor Account Activity:
Regularly review your credit card statements and account activity to identify any unauthorized charges or errors promptly.
8. Take Advantage of Cardholder Benefits:
Business credit cards often come with various benefits like purchase protection, extended warranties, and travel insurance. Utilize these benefits when appropriate to save money and protect your business.
9. Keep an Eye on Changes:
Card issuers may update their rewards programs or card features. Stay informed about any changes to ensure you continue to get the best value from your card.
10. Combine Multiple Cards:
Depending on your business needs, it may be beneficial to use multiple business credit cards to optimize rewards. For instance, you can use one card for travel expenses and another for advertising and marketing.
Common Pitfalls and How to Avoid Them
While business credit cards offer numerous advantages, there are also potential pitfalls to be aware of. Here are some common challenges and how to avoid them:
1. High-Interest Rates:
Business credit cards often come with higher interest rates than personal credit cards. To avoid high-interest charges, pay your balance in full each month.
2. Overspending:
The convenience of a credit card can lead to overspending. Establish a clear budget and spending limits to prevent accumulating excessive debt.
3. Personal Liability:
With a personal guarantee, you are personally responsible for the card’s debt. Be cautious when using business credit cards, and consider the potential risk to your personal finances.
4. Annual Fees:
Some business credit cards charge annual fees. Evaluate whether the rewards and benefits outweigh the annual fee, and consider no-annual-fee alternatives if not.
5. Mismanagement of Employee Cards:
If you issue employee cards, ensure that you have proper controls in place. Monitor their spending and set clear guidelines to prevent misuse.
6. Failure to Make Timely Payments:
Late payments can damage your credit score and result in late fees and increased interest rates. Establish reminders or automatic payments to ensure timely payments.
7. Ignoring Terms and Conditions:
Always read and understand the terms and conditions of your business credit card. Pay attention to any changes in the card’s features or rewards program.
8. Accumulating Debt:
Be cautious of carrying high balances on your business credit card. High debt levels can negatively impact your credit score and create financial stress.
9. Not Utilizing Benefits:
Failing to take advantage of the benefits offered by your card, such as purchase protection or travel insurance, means missing out on potential cost savings.
10. Neglecting Business Credit Building:
To access better credit card options and financial products, prioritize building your business credit over time.
Managing Business Credit Responsibly
Once you’ve selected the best business credit card for your needs and started using it for your business expenses, responsible credit management becomes crucial. Proper management not only ensures you can continue to access credit and rewards but also safeguards your business’s financial stability. Here are some key tips for managing your business credit responsibly:
Pay Your Bills on Time:
Timely payments are one of the most critical factors affecting your business credit. Pay your credit card bills on or before the due date to avoid late fees and negative marks on your credit report.
Set Up Automatic Payments:
To minimize the risk of missing payments, consider setting up automatic payments for at least the minimum amount due. This ensures you never miss a payment, even if you have a busy schedule.
Monitor Your Credit Utilization:
Credit utilization, the ratio of your credit card balance to your credit limit, plays a significant role in your credit score. Try to keep your credit utilization below 30% to maintain a favorable credit profile.
Avoid Carrying High Balances:
While it’s essential to use your business credit card for expenses, avoid carrying high balances from month to month. Paying only the minimum can lead to significant interest charges and debt accumulation.
Review Statements Carefully:
Regularly review your credit card statements for any errors or unauthorized charges. Dispute any discrepancies promptly to ensure the accuracy of your account.
Consider Payment Terms:
Some business credit cards offer flexible payment terms that allow you to carry a balance for certain expenses. Make sure you understand the terms and interest rates associated with these balances.
Plan for Large Purchases:
If you anticipate making significant business purchases, plan ahead and budget for them. This can help you avoid large credit card balances that may strain your finances.
Use Employee Cards Wisely:
If you’ve issued employee cards, set clear guidelines for their use and ensure that their spending aligns with your business’s needs. Regularly review their expenses.
Negotiate Better Terms:
If you have a strong credit history and a good relationship with the card issuer, consider negotiating for better terms, such as lower interest rates or higher credit limits.
Be Prepared for Interest Charges:
While it’s advisable to pay your balance in full each month, be prepared for interest charges if you occasionally carry a balance. Understand the interest rates and terms associated with your card.
Managing Multiple Business Credit Cards
Many businesses find it advantageous to manage multiple business credit cards to optimize rewards and benefits. While having multiple cards can be beneficial, it also requires careful management. Here are some strategies for effectively managing multiple business credit cards:
Set Clear Budgets:
Establish clear budgets and guidelines for each card’s use. Assign specific cards to different spending categories or business functions.
Track Expenses Systematically:
Use expense management tools and software to track and categorize expenses from each card. This helps you maintain control and easily monitor your finances.
Regularly Review Statements:
Regularly review the statements of all your business credit cards to ensure accuracy and identify any unauthorized charges.
Plan for Payments:
Keep a well-organized schedule for making payments on each card. You can use reminders or automatic payments to stay on top of due dates.
Maximize Rewards:
Strategically use each card to maximize rewards in specific spending categories. For example, if one card offers bonus rewards on travel, use it for all your business travel expenses.
Assess the Total Cost:
Consider the total cost of annual fees, interest rates, and other fees when managing multiple cards. Ensure that the combined cost is justified by the rewards and benefits you receive.
Negotiate Better Terms:
If you have a strong relationship with your card issuers, don’t hesitate to negotiate for better terms on multiple cards, such as lower interest rates or higher credit limits.
Maintain Clear Records:
Maintain organized records of each card’s terms, rewards, and benefits. This makes it easier to make informed decisions when using each card.
Manage Employee Cards:
If you have employee cards, implement guidelines and monitoring to ensure their responsible use.
Building Business Credit for the Long Term
Building and maintaining strong business credit is a long-term endeavor that can lead to access to better credit cards and financial products. Here are some strategies for long-term business credit building:
Consistently Pay Bills:
Continue to pay your business bills and credit card balances on time. Timely payments have a positive long-term impact on your credit history.
Review Your Business Credit Report:
Regularly review your business credit report to ensure accuracy and address any discrepancies. You can obtain your business credit report from credit bureaus like Experian, Equifax, and Dun & Bradstreet.
Maintain Low Credit Utilization:
Keeping your credit utilization low is essential for long-term credit health. Avoid maxing out your credit cards, as high balances can negatively impact your credit score.
Gradually Increase Credit Limits:
As your business credit improves, request credit limit increases on your existing business credit cards. This can help improve your credit utilization ratio.
Build Vendor and Supplier Relationships:
Establish positive relationships with vendors and suppliers who report your payment history to business credit bureaus. This helps enhance your business credit profile over time.
Consider Business Loans:
Taking out and repaying business loans can also contribute to your business credit history. Just like with credit cards, make sure to make timely payments.
Monitor and Manage Debt:
Manage your business debt responsibly. Avoid carrying high balances, and prioritize paying down outstanding loans and credit card balances.
Seek Professional Advice:
If you’re unsure about the best strategies for long-term credit building, consider seeking advice from a financial advisor or credit specialist who specializes in business credit.
Long-Term Benefits of Strong Business Credit
Building and maintaining strong business credit offers several long-term benefits:
Access to Better Financial Products: As your business credit improves, you’ll qualify for better financial products, including business credit cards with lower interest rates, higher credit limits, and more favorable terms.
Enhanced Business Opportunities: Strong business credit can open doors to business opportunities, such as partnerships, contracts, and investments, as it demonstrates your financial responsibility.
Financial Flexibility: With a solid credit profile, your business will have the financial flexibility to navigate economic downturns or seize growth opportunities.
Lower Costs: Strong business credit can result in lower costs associated with financing, as you’re more likely to secure loans and credit cards with favorable interest rates and terms.
Improved Cash Flow: A positive credit history can lead to better cash flow management, as you’ll have access to credit when needed and be able to negotiate more favorable payment terms with vendors.
Final Thoughts on Business Credit Cards
Business credit cards are versatile financial tools that can benefit businesses of all sizes. They offer the convenience of access to credit, expense tracking, and valuable rewards. However, choosing the right business credit card and managing it responsibly are critical for realizing the full potential of these cards.
Whether you opt for a cash back card like the American Express Blue Business Cash Card, a flexible rewards card like the Bank of America Business Advantage Cash Rewards Mastercard, or a low-APR card like the Wells Fargo Business Platinum Credit Card, remember that each card has its unique features and benefits. By selecting the one that aligns with your business’s spending patterns, needs, and financial goals, you can maximize the value of your business credit card.
Responsible credit management, including paying bills on time and maintaining low balances, is essential for preserving your business’s financial health and creditworthiness. Building strong business credit over the long term opens doors to better financial opportunities and enhances your business’s overall stability and growth potential.
In conclusion, business credit cards are invaluable tools that offer numerous advantages to businesses. Whether you’re a sole proprietor, a startup, or a well-established company, there’s likely a business credit card that can benefit your unique needs. Carefully research, compare, and choose the right business credit card for your specific requirements, and then use it wisely to enhance your financial flexibility, streamline expenses, and earn rewards that can support your business’s growth and success.