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Whether your business is a blooming startup or a booming institution, a business credit card can offer many benefits. Not only does it offer higher credit limits, but having a separate card unrelated to personal accounts can help keep records organized for tax season. Here are a few helpful things to keep in mind while considering the best credit card for your business’ needs.
Potential Benefits of a Business Card
A business card is much like any personal credit card but with a few additional perks and a handful of caveats. For a business account, the credit limit tends to be higher. This means you can spend more on your business card to fund purchases to fuel your company’s growth. It also allows a business to build its own credit score history, which may come in handy for future loans or investments for the company’s expansion. Bookkeeping can be much simpler when your business’ finances are separate from your personal accounts.
Higher Credit Limits
According to 2020 data from Experian, the average consumer credit limit sat around $31,015 while the average small business credit card limit reached $56,100. Since card issuers set credit limits based on a variety of factors—including your credit score and income—it makes sense the same is taken into account for a business. The sooner your business starts building its own credit history, the easier it will be to increase spending limits and request loans for higher sums.
This is especially helpful for small businesses with more financial constraints. It is much easier to make large purchases such as bulk inventory and material, shipments or travel expenses with a business credit card. The higher spending limit also allows you to make more purchases in a single statement period without maxing out the card. This avoids increasing your credit utilization—the ratio of your credit card’s balance to its assigned spending limit.
In short, the lower the credit balance each statement period, the better your business looks. Freedom to make larger purchases for a business also leaves business owners with more independence without having to constantly seek out loans from the bank.
Building Business Credit
Why would a business itself need a credit score? Like individual consumers, businesses have financial profiles, which over time naturally develop a history of spending and revenue patterns.
The benefit of an initial business credit card is establishing and building a business credit score to increase the businesses’ credibility and reliability in the eyes of additional credit card companies, banks and investors. A business, like any individual, will also benefit from lower interest rates when a business credit bureau reports a clean record and a steady payment history.
How to Get a Business Credit Card
Applying for a business credit card is simple, but, like any financial decision, requires diligent research. Consider a few important points before filling out online applications for a business credit card.
Determine Your Eligibility
Your business is not required to have incorporated in any way to qualify for a business credit card and the size of your company does not matter for basic card eligibility. You can apply for a business credit card even if the expenses you plan on paying with the card are for a side-gig or if you are the sole-proprietor of a small freelance business.
Whether or not your business will be approved for a benefits-packed, reward-earning card is another issue, however. The first step in applying for a business credit card is determining which card you can qualify for. Your personal credit might make this determination if your business doesn’t already have established credit.
The most important factor in applying for any credit card is your or your business’ credit history. As a business owner, credit card companies will nearly always want to verify your personal credit score, so ensure you maintain healthy spending habits on existing personal accounts. This will ultimately determine which cards you’ll receive approval for.
Major assets and commercial income can help qualify your business for better cards. Don’t expect approval for a high-end benefit-heavy business credit card when you’re only making a few dollars with a side hustle. You’ll need to show substantial income to earn the high credit limits of the best cards.
Gather Required Information
In addition to the personal information you would normally provide for any credit card application, a business credit card application will also ask for proof of your business’ existence. Details might include your business’ name, registered address, annual revenue, number of employees, estimated spending needs and an employer ID number (your own SSN can usually substitute in the case your business doesn’t have an EIN).
The bank or card issuer will ask you to fill out the above information regarding the nature of your business and may have follow-up questions for you during the verification process. Be honest and provide any documentation requested. Even if your new business’ current income is still low or nonexistent, it is better to disclose this and provide a business plan showing projected revenue.
It may help to seek out cards offered by banks you already have a relationship with—this can make the application process more comfortable, efficient and successful.
Potential Issues for Business Owners
The balance on the credit card is ultimately your responsibility—as a business owner, you’ll usually be required to provide a personal guarantee for your business card. If your business does not make enough to pay off the entire card balance when the payment period ends, you will be responsible for paying off the rest from your personal funds.
This is another reason why your personal credit history will matter when applying for a business credit card—to prove that as an individual consumer you have a reliable payment history and steady income.
Since most cards have a preset credit limit, it may be more difficult for you if your business’ monthly spending varies drastically. When applying for a card you will want to carefully examine recurring or initial start-up fees, bonuses, rewards, interest rates and of course, spending limits.
Which Card Is Best for My Business?
The right card for your business will depend largely on how you define your business and how you believe the credit card will serve you in making work-related purchases. Do you travel often for your business? Do you take clients out for frequent meals? Do you buy products in bulk from specific companies that may participate in rewards programs?
These are the kinds of routine purchases to take into account. What will you use the credit card for most often and how large will your average spending sums add up to? The answers to all these questions will help you find the best business card for your business. Here are some cards that might fit your business’ needs.
American Express® Business Gold Card
Ink Business Cash® Credit Card
Up to 5% Reward Rate
Earn 5% cash back on the first $25,000 spent in combined purchases at office supply stores and on internet, cableRead More
Earn $750 bonus cash back
13.24% – 19.24% Variable
Excellent, Good (700 – 749)
Marriott Bonvoy Business™ American Express® Card
Up to 6X Reward Rate
6 points per dollar at hotels participating in the Marriott Bonvoy™ program, 4 points per dollar at U.S. restaurants, atRead More
Earn 75,000 points
15.74% – 24.74% Variable
Excellent/Good (700 – 749)
Small Business Credit Cards for Newer Businesses
If your business is young or you’ve never had a business account before there are certain things to look out for to set you ahead with spending and not set you back with potential mounds of debt. An example might be a card with 0% introductory APR on new purchases. These introductory offers can save you high costs if your business spending calls for large sum purchases all at once and you want to pay them off more slowly over the introductory period without incurring interest. Be warned: do not make purchases you cannot pay off during the period as interest charged after the intro period may be retroactive to the purchase date.
Business Green Rewards Card from American Express
Up to 2X Reward Rate
Earn 2X points for each dollar you spend on eligible purchases at American Express Travel; Earn 1X points for eachRead More
$0 introductory annual fee for the first year, then $95
14.24% – 22.24% variable
Excellent Credit (750 – 850)
The Blue Business® Plus Credit Card from American Express
Up to 2X Reward Rate
Earn 2X points on the first $50,000 in purchases each year; Earn unlimited 1X points on purchases thereafter
Earn 15,000 points
13.24% – 21.24% Variable
Excellent, Good (700 – 749)
Up to 10-20X Reward Rate
Get 10-20x higher limits than traditional business credit cards while earning rewards and cash back on everything you spend, likeRead More
No Credit Check
Though attaching a credit card account to your business is not strictly necessary, it is worth looking into for the opportunities it could afford you as your business grows. The ability to accumulate rewards and earn cash back on the card for future or recurring purchases and the opportunities a healthy business credit score can unlock can be an essential financial resource for a young company. Using a separate card for business expenses can also help you keep better track of your personal vs. professional spending.
Choose the card best for your business based on your industry and the average amount of work-related spending you do. Carefully consider how best the card can serve your business before applying.
To view rates and fees of American Express® Business Gold Card, please visit this page.
To view rates and fees of Marriott Bonvoy Business™ American Express® Card, please visit this page.
To view rates and fees for The Blue Business® Plus Credit Card from American Express please visit this page.
Frequently Asked Questions
Just about every type of credit card will have an assigned credit limit. This is the maximum amount the credit card company will allow the cardholder to spend on the account at a time before paying down the card’s balance. The exception to this rule is a business charge card such as the American Express Business Platinum, which does not have a set limit but requires the amount to be paid in full each month.
Can I increase my business’ credit limit?
You may request a spending limit increase on your business credit card. You can show proof your company needs a higher spending limit for specific purchases and that you have the means to maintain a stable credit score. You can also request a temporary increase for a predetermined amount of time.