Published in: Credit Cards | March 19, 2019

How Business Credit Cards Work

Still relying on a personal credit card to cover your business expenses? That might be a mistake.
A pile of business credit cards.Image source: Getty Images. 

If you’re still using your personal credit card to cover costs associated with your business, you might want to reconsider. Whether you employ 50 people or you’re self-employed, business credit cards can be a handy way to finance your business expenses while earning extra rewards, building your business credit, and keeping your finances separate. Here’s everything you need to know about how business credit cards work, whether or not you can qualify for a business credit card, and how to find the best one.

What is a business credit card?

Business credit cards work similarly to personal credit cards in that they give you the ability to finance purchases using a line of credit, and often they come with additional benefits and rewards. The main difference is that business credit cards are specifically for your business-related expenses, and approval will hinge on the details of your business in addition to your credit history. The best business credit cards also come with protections, benefits, and rewards that are specifically designed for business owners.

Can you use a business credit card for personal expenses?

As a cardholder of a business credit card, you agree to use it for business purposes and not personal expenses, and most major issuers stipulate this in the card’s terms and conditions. While your issuer might not be able to prove that certain expenses were made for personal reasons rather than business reasons, it’s worth noting that you won’t enjoy the same consumer protections while using a business credit card, and some of the benefits associated with the business credit card -- such as auto rental insurance -- may not apply if the expense was personal.

How to qualify for a business credit card

In order to qualify for a business credit card, you’ll still need to have a good credit score. However, in addition to a solid personal credit report, issuers may want to see that your business has been open for a while and is generating revenue. This doesn’t mean you need to be making six figures, or even five, but it does mean that your business needs to be real.

To qualify for business credit cards you don’t necessarily need to own a big company. Businesses that qualify are essentially anything that you profit off of outside of traditional employment. This can include owning a brick-and-mortar business or running an online company, but it can also include side gigs like selling stuff on eBay, tutoring, coaching, and freelancing.

If you’re just starting out and have very little or no revenue, you might still qualify for a business credit card. Most issuers will also look at your personal credit history and your regular income in order to judge your creditworthiness. You may also have more luck applying for a business credit card with an issuer with whom you’ve already formed a previous relationship.

You don’t need an EIN (Employer Identification Number) in order to apply for a business credit card. You can apply using either an EIN or your personal Social Security number.

Advantages of business credit cards

You can always use a personal credit card for your business expenses, but there are a number of benefits that come with opting for a business credit card.

Rewards on business spending -- Business credit cards that offer rewards typically structure them around typical business expenses. This means that you could be earning rewards at a higher rate for purchases like travel, utility bills, shipping, marketing and advertising, printing, and more.

Benefits for business owners -- Using a good business credit card may give you access to perks like free subscriptions to business software, primary auto rental insurance, and other business resources.

Might not impact your personal credit -- While some issuers do report business credit card activity to consumer credit bureaus, most don’t. If you go with one of the issuers that don’t report to consumer credit bureaus, it means that the activity on your business credit card won’t impact your credit score unless you become seriously delinquent.

Builds your business credit -- Your business credit card activity might not be reported to consumer credit bureaus, but it is reported to commercial credit bureaus. This means that by using a business credit card, you’re building your business credit, which can come in handy if you ever want to take out a business loan.

Keeps your finances separate -- Using a business credit card for business expenses and a consumer credit card for personal expenses keeps your finances separate. This is especially helpful during tax season when having those purchases already separated out can save you time and money.

Bigger spending limits -- There’s a good chance that you’ll be offered a higher credit limit with a business credit card than you would with a personal credit card. This is helpful if you tend to bump up against your credit limit, and if not, it gives your business room to grow.

Employee credit cards -- Business credit cards also give you the option to order additional employee credit cards, and they’re typically free.

Comparing the best small business credit cards

Choosing the best business credit card for you depends on your spending habits and financial goals. As you weigh your options, look for business credit cards that come with lucrative rewards programs that reward the kind of spending you do -- but make sure they’re rewards you’ll actually want to use.

For cash back: Spark Cash® for Business from Capital One®

  • Earn unlimited 2% cash back on all purchases
  • $500 cash sign-up bonus if you spend $4,500 in the first three months
  • No foreign transaction fees
  • $95 annual fee, waived the first year

This is a solid cash-back credit card for small businesses with a simple yet powerful rewards program. In the world of cash back, it doesn’t get much better than earning an unlimited 2% back on all purchases. Don’t overlook the sign-up bonus, which is also generous for a cash-back credit card.

For flexible travel rewards: Chase Ink Business Preferred

  • Earn 3 points per $1 on up to $150,000 of combined spending on travel, shipping, internet, cable, phone, and select advertising
  • 80,000 point sign-up bonus if you spend $5,000 in the first three months
  • 25% bonus on travel redemptions made through the Chase Ultimate Rewards® portal
  • No foreign transaction fees
  • $95 annual fee

This is a favorite amongst small business owners who travel often due to the flexibility of Chase’s Ultimate Rewards® program and the massive sign-up bonus. When redeemed through Chase’s travel portal, the 80,000 point bonus is worth $1,000. You’ll also earn points quickly on a variety of business-related purchases.

For frequent flyers: CitiBusiness® / AAdvantage® Platinum Select® World Mastercard® or United℠ Explorer Business Card

Depending on what airline you fly with more often, both of these are excellent choices for business owners who collect airline miles.

CitiBusiness® / AAdvantage® Platinum Select® World Mastercard®

  • Earn 2 points per $1 spent on American Airlines, cable, telecommunications, gas, and rental cars
  • 50,000 mile sign-up bonus if you spend $3,000 in the first three months, plus an additional 10,000 bonus miles if you spend $10,000 in the first 12 months, for a total of 60,000 miles
  • First checked bag free on American Airlines and preferred boarding
  • Earn an American Airlines companion certificate for domestic flights each cardmember year in which you spend $30,000
  • 25% off in-flight purchases
  • No foreign transaction fees
  • $99 annual fee, waived the first year

The sign-up bonus is competitive on this card if you can hit both of the minimum spending requirements during your first year, but the free checked bag alone is worth the annual fee if you travel with American Airlines more than a couple times per year.

United℠ Explorer Business Card

  • Earn 2 points per $1 spent on United, restaurants, gas stations, and office supply stores
  • 75,000 mile sign-up bonus if you spend $5,000 in the first three months
  • First checked bag free on United and priority boarding
  • Two United Club one-time passes on each cardmember anniversary
  • No foreign transaction fees
  • $95 annual fee, waived the first year

This card comes with one of the best sign-up bonuses for an airline credit card as well as a free checked bag benefit that pays for itself after just a couple flights.

Switching to a business credit card to cover your business expenses will help you keep your finances separate and build your credit reputation as a business owner. If you choose your cards carefully, it could also help you maximize your rewards.

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