What is a business credit card and how does it work?

Summary

• A business credit card is a credit card used specifically to purchase business expenses.
• A business credit card can help you separate your business and personal expenses to make it easier to file your taxes.
• Business credit cards offer several benefits, including higher credit limits to support larger expenses, tools for tracking and managing business spending, and tailored rewards for categories like office supplies, travel, and utilities.

There’s no better feeling than when your small business starts to take off. Whether you just registered your business with the state, or you’ve gone from pop-up to brick-and-mortar, hitting these milestones can take your business from idea to reality.

But as any entrepreneur knows, as business grows, so do financial demands, which is why many small companies rely on business credit cards to help keep things running smoothly. In this article, we’ll explore what business credit cards are, how they work, and the benefits they offer so you can maximize the financial impact on your thriving business.

What is a business credit card?

A business credit card is used specifically for business expenses. Similar to the personal credit card you might already have in your wallet, a business card operates on a revolving line of credit, allowing you to spend up to a certain credit limit and then repay the balance you owe each month. Depending on your business needs, you might look for a business card that offers rewards like cash back or travel rewards in the categories where you spend the most.

How to get a business credit card

You can typically use the following process to get a business credit card:

1. Start by exploring various card options

You can review and compare business credit cards across categories, such as which ones earn cash back or points, which ones have no annual fee, and which have the lowest interest rates.

Keep an eye out for welcome offers that can boost your rewards when you spend a certain amount in the first few months after opening a card.

2. Gather information and apply

After you decide which card fits best, you can apply for your business credit card using your employer identification number (EIN). If your business doesn’t yet have an EIN, you may also be able to apply using your personal Social Security number (SSN). If you apply using your SSN, you may have to commit a personal guarantee, which means you personally agree to cover the balance of the business card if your business has insufficient funds to pay.

When you apply, the card provider may review your personal or business credit history. Submitting an application usually involves a hard inquiry on your credit report to assess your creditworthiness.

3. Receive a decision

Since the approval process is automated with most card providers, you may receive an immediate credit decision after applying. Some card companies may ask for additional information to help make their decision and approval is not guaranteed.

4. Get your card and begin spending

If approved, you’ll receive your credit card in the mail and can begin using it for business expenses.

What can you put on a business credit card?

The simple answer is that you can put most reasonable business expensesvon your credit card.
Common expenses may include:

• Fixed expenses: Rent for a brick-and-mortar business, phone bills, utilities or business insurance.
• Marketing expenses: Digital advertising, print advertising, collateral and website development.
• Office supplies: Printer ink, paper, staplers and laptops.
• Travel expenses: Gas, flights and hotels for client meetings.
• Vendor invoices: Inventory purchases, shipping and professional services.

What are some benefits of a business credit card?

A business credit card has several benefits beyond what you might find in a personal credit card.

Grants higher credit limits

Typically, your spending needs as a business far surpass those you require as an individual. Business cards usually have higher limits for this reason, allowing you to buy equipment, software, and other supplies when you need them.

Helps you earn business-specific rewards

Phone bills, office supplies, and gas station purchases are common categories for which business credit cards offer spending rewards. And those rewards can add up quickly when you use your card for regular business purchases. For example, the U.S. Bank Business Leverage® Visa Signature® card  has no reward limits, so there’s no cap on the amount you can earn.

Gives easy access to tax documents

Many banks send an itemized report of your spending at the end of the year to make tax filing simpler. These reports can help you categorize your expenses and track where your money is going so you can take full advantage of potential deductions for your business.

Business expense management tools

Many business credit cards have tools to help businesses streamline spending. For example, the U.S. Bank Triple Cash Rewards Visa® Business Card  includes Spend Analysis, an exclusive online reporting tool that gives you a clear picture of your total business spending broken down by category, so you know how much money is going where.

Separates employee spending

Since you can get an individual credit card for each employee, it’s simple to track spending across your team.

Could help build your business credit score

Your company has its own credit score that’s separate from your personal score. Having a business credit card could help to establish and improve your business credit score , assuming you make payments on time and in full each month.

Offers fraud protection

You may feel safer paying with a business credit card than using cash, check, or ACH transactions. Your card provider can also help resolve disputes if there’s suspected fraud on your card.

When does a business credit card make sense?

You might decide to turn to a business credit card when it becomes too confusing to manage your personal and business expenses from the same accounts. Or maybe you need to make a purchase that’s higher than the current credit limit you have available. Typically, you’ll want to wait until your business has regular income before you get a business card so you can confidently cover the monthly payments.

Whether you’re a single-member LLC or a C corporation, there’s a business card available to suit your needs. Be sure to compare card options and choose the one that aligns with the spending you’re already doing.

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