What is a Business Credit Card?

Traditional business credit cards are meant for usage by a company or small business owner. Large and small businesses can apply for business credit cards, which can help create a credit profile and improve borrowing arrangements in the future.

Business credit cards can give a variety of advantages. These include cashback or rewards, bonus points, travel rewards, and expense management tools. The key to obtaining the most acceptable business card is determining which features are essential to your business expenses and what you value the most: customized cash rewards, cash back, or credit-building help.

Business Credit Card vs. Personal Credit Card

Business credit cards and personal cards are both types of credit cards, but they differ in several key ways. Understanding the differences between these two types of credit cards is important, especially for those who own a business or are considering starting one.

• Purpose. The cards are designed for use by companies and are used to make purchases related to the business. Personal cards are for personal use and are used for everyday business purchases such as groceries, gas, dining, and more.
• Credit limit. Business cards typically offer higher credit limits than personal credit cards. This is because business credit cards are intended for use by companies that often have higher spending needs than individuals. Higher credit limits can also help businesses manage their cash flow by allowing them to make larger purchases or pay bills over time.
• Rewards and bonus points. Business cards often offer rewards and bonuses that are tailored to the needs of businesses, such as cash back on business-related expenses like office supplies or travel. On the other hand, personal credit cards offer rewards and bonuses that are more geared toward individuals, such as cash back on dining, gas, or grocery purchases.
• Level of liability. Business cards are often tied to the business owner, which means that the business owner is personally responsible for the debt incurred by the business. This is different from personal credit cards, where the individual is responsible for the debt incurred on their card.
• Reporting features. Business cards come with more advanced reporting features, such as itemized receipts and the ability to track expenses by category or by the employee. These features can be helpful for business owners who need to keep track of their expenses for tax purposes or for budgeting purposes. Personal credit cards, on the other hand, typically do not have these advanced reporting features.

Why You Need a Business Credit Card?

A business credit card can provide a number of benefits for both small and large businesses. Here are some of the key reasons why a business card can be a valuable tool for managing business finances.

• Separation of business and personal expenses. One of the primary benefits of a business card is that it allows you to keep your business and personal expenses separate. This can be especially important for small business owners who often mix their personal and business expenses. Having a separate business and personal expenses can make it easier to track expenses, manage cash flow, and prepare financial statements.
• Increased credit limits. Business credit cards often offer higher credit limits than personal credit cards. This is because businesses have higher spending needs than individuals. Higher preset spending limits can help businesses manage their cash flow by allowing them to make larger purchases or pay bills over time.
• Rewards and bonuses. Business cards often have rewards and bonuses that are tailored to the needs of businesses. For example, cash back on business-related expenses like office supplies or travel. These rewards can help reduce business expenses and increase profitability.
• Improved reporting. Business credit cards typically come with more advanced reporting features, such as itemized receipts and the ability to track expenses by category or by the employee. These features can be helpful for business owners who need to keep track of their expenses for tax purposes or for budgeting purposes.
• Improved credit score. Using a business card responsibly can help improve your business's credit score, which can make it easier to secure financing in the future. A good business credit score can also help you negotiate better terms with suppliers and lenders.
• Convenience. A business card can be a convenient tool for managing business expenses. For example, you can use your business credit card to make purchases or pay bills, even when you don't have access to cash. This can be especially helpful for small business owners who are often on the go.
• Improved record keeping. By using a business card, you can keep better records of your business expenses. This can be especially helpful for tax purposes, as you can easily track your expenses and categorize them for tax purposes.

How to Build Business Credit With a Card?

A business card may be one of the most effective instruments for establishing business credit in case you pay it off each month in full, keep the balance low (less than 30% of credit), and make regular, on-time payments.

Register your Company and Get an EIN

First, register your business. The process varies by business structure and location. In certain states, sole proprietors don't need to register but may need a local business license. The IRS offers EINs. IRS requires a business tax ID, but it's not essential to develop business credit.

Request a DUNS Number

DUNS numbers are required for Dun & Bradstreet, one of the three major business credit bureaus. Visit Dun & Bradstreet's website to request a DUNS number. Lenders and other businesses often use this unique nine-digit number to check your credit profile and financial health. A DUNS number is required to apply for a federal grant. You do not need to request a unique identifier from other business credit bureaus, like Experian and Equifax.

Open a Credit Card for Your Business

If you make regular, on-time payments and pay off your card balance each month, you can build business credit quickly. You can get a business card without an established business credit profile since business card issuers use your personal credit. On-time payments and low credit utilization can help you build your business credit score. People with poor credit can look into secured business credit cards, which require a deposit and can typically be upgraded to unsecured cards.

Create Trade Lines With Your Suppliers

Suppliers often extend trade credit, allowing you to pay several days or weeks after receiving inventory. A supplier reporting payments to a business credit bureau can boost your business credit score. Any small vendor, such as your water or office supply stores, can set up trade lines. You can list those vendors as trade references on your account if they don't report to a credit bureau.

Early Payment to Creditors

Your payment behavior determines your business credit score. On-time payments are good, but early payments are better. Paydex scores, which measure a company's payment history, are only assigned to early payers by Dun & Bradstreet. Your business credit score is also affected by the length of your credit history. Maintain relationships with creditors and use less than 30% of available credit.

Borrow From Lenders Who Report to Credit Agencies

You can boost your business credit with small-business loans, but not all lenders report to credit bureaus. Before taking a small business loan, ask the lender if they report. Credit bureaus generally report to banks, but banks have stringent lending criteria and can be hard to qualify for unless you have excellent credit. Most online small-business lenders, including OnDeck, LendingClub, Funding Circle, and Bluevine, report to business credit bureaus, making them more accessible to new businesses and people with poor credit. Other lenders, including SmartBiz, Fundbox, and merchant cash advance companies, do not.

Stay Away From Judgments and Liens

Judgments, liens, and bankruptcy filings negatively affect your business credit score. Unpaid taxes or business debt can cause a lien, allowing creditors to seize your property. Outstanding debt may cause a court judgment against your business. Negative lines on your business credit report can haunt you. For example, bankruptcy remains in your Experian credit history for ten years; tax liens, judgments, and collections remain for almost seven years.

Maintain Your Information With All Three Credit Bureaus

Keep track of your business credit report to ensure it's accurate, just like your personal credit. The three leading business credit bureaus are Dun & Bradstreet, Experian, and Equifax. Verify your business credit score with all three; ensure all trade lines are accounted for, and report any errors, whether it's your address or negative marks on your report.

How to Choose a Business Credit Card?

Choosing the right business credit card can help you save money, increase your purchasing power, and improve your business's financial management. Here are some key factors to consider when selecting a business credit card.

• Rewards and benefits. The rewards and benefits offered by different business credit cards can vary widely. Some cards offer cash back on specific purchases, such as office supplies or travel expenses, while others offer points or miles that can be redeemed for travel or other purchases. Consider the types of expenses that your business incurs and choose a card that offers rewards that align with your spending patterns.
• Annual fees. Some business credit cards charge annual fees, while others do not. Before applying for a card, consider the cost of the annual fee and weigh it against the potential rewards and benefits you will receive.
• Interest rates. The interest rate on a card is the rate at which you will be charged if you carry a balance on the card. Consider the interest rate when choosing a card, especially if you plan to use the card to finance purchases that you will not be able to pay off in full each month.
• Credit limit. The credit limit on a card is the maximum amount you can borrow from the issuer. Consider the credit limit when choosing a card, especially if you plan to make large purchases or if you need to manage cash flow.
• Interest-free period. Some business credit cards offer an interest-free period during which you can pay off your balance without incurring interest charges. Consider the length of the interest-free period when choosing a card, as this can help you manage your cash flow and reduce your costs.
• Customer service. The quality of customer service offered by different card issuers can vary widely. Consider the level of customer service provided by each issuer when choosing a card, as this can be especially important if you need help resolving a problem or dispute.
• Additional benefits. Some business credit cards offer additional benefits, such as travel insurance, extended warranty coverage, or concierge services. Consider the additional benefits offered by each card when choosing a card, as these can add value to your card and help you save money.
• Financial stability of the issuer. The financial stability of the card issuer can be important, as you may be at risk of losing your rewards or benefits if the issuer experiences financial difficulties. Consider the financial stability of each issuer when choosing a card, and choose a card issued by an issuer with strong financial resources.

Choosing the right business credit card involves considering a variety of factors, including rewards and benefits, annual fees, interest rates, credit limit, interest-free period, customer service, additional benefits, and the financial stability of the issuer. By carefully considering these factors, you can choose a card that meets the needs of your business and helps you manage your finances more effectively.

The Best Business Credit Cards

How to Get a Business Credit Card?

Applying for a business credit card is a straightforward process, but it can take a bit more time and paperwork than applying for a personal credit card. Here are the steps you need to follow to apply for a business credit card:

1. Determine your business's credit standing. Before applying for a business credit card, you need to know your business's credit standing. Check your business's credit record and make sure there are no errors that could affect your chances of being approved for a credit card.
2. Choose a credit card. Research different business credit card options to determine which one best fits your business's needs. Consider the rewards, benefits, fees, and APR associated with each card.
3. Gather information about your business. To apply for a business credit card, you'll need to provide information about your business. This can include your business's name, tax ID number, annual revenue, and the number of employees. You'll also need to provide personal information about yourself, including your name, Social Security number, and address.
4. Complete the application. Once you have all of the information you need, complete the credit card application. This can typically be done online or over the phone.
5. Wait for a response. After submitting your application, wait for the credit card issuer to process it and provide a response. This can take a few days or a few weeks, depending on the issuer.
6. Review the terms and conditions. If your application is approved, you'll receive a credit card agreement with the terms and conditions of the card. Review the agreement carefully and make sure you understand the rewards, benefits, fees, and APR associated with the card.
7. Activate the card. Once you receive your card, activate it and start using it for your purchases. Make sure to use the card responsibly and pay your bills on time to maintain a good credit standing for your business.

In addition to these steps, you may also need to provide additional documentation, such as a copy of your business license or a letter from a business partner or owner, to prove that you are authorized to apply for a credit card on behalf of your business.

It's important to choose a business credit card that fits the needs of your business and to use the card responsibly. By doing so, you can help build your business's credit standing and take advantage of the rewards and benefits offered by the card.