Business Credit Card is a financial tool that allows a company to make purchases on credit, manage expenses, and build a separate credit history for the business while providing potential rewards or benefits tailored to business needs.
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Business credit cards are intended for business use only and are a great way to separate your personal and company expenses.
As the name implies, the definition of a business credit card is a card that will be used for business purposes. Any size business, from a sole proprietorship to a corporation, can qualify. Even gig workers, freelancers, and others doing work without forming a separate legal entity may be eligible.
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When you apply for a business credit card, the application will likely ask for a few different things than a consumer credit card application. These include:
But don’t worry if you’re a sole proprietor. Just use your own name and address.
If you have a limited liability company or corporation, you probably have an Employer Identification Number. Use that number for this question. If you’re a solo operation, your personal social security number is sufficient.
The credit card company is looking for a broad category, like delivery, retail, or food service.
The credit card company needs to assess your business’s creditworthiness. This question gives them a sense of how much money your business brings in and what percentage of those profits is offset by business spending.
The application also will ask how long you have been in business. The less credit history your company has, the more they will rely on your personal credit history.
What are business credit card advantages? Some offer even better benefits than consumer credit cards, including:
It’s important to think about your company’s needs when deciding on the best card (for more information see best business credit cards page). If you anticipate making large purchases up front and don’t want the hassle of applying for a loan, then a card with a one-year zero APR period would be a good choice. If your employees travel extensively, then choose a card with travel perks and protections.
Some cards charge an annual fee, but if you earn thousands in cash back a year, a $100 fee might be worth it for the other perks. For instance, if your small business has variable cash flow, a card that allows flexible repayment would be beneficial.
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Most business credit cards require the business owner to sign a personal guarantee. This means you agree to cover any balances your business can’t pay. Your personal credit score may take a small hit when the business credit card application shows up as an inquiry on your credit report.
Once you can switch to a corporate card, you can limit your personal liability. Corporate card holders are eligible for commercial liability, which means only the corporation is responsible for its credit card debts.
Business credit cards also aren’t covered by consumer protection laws that set limits on fees and interest for consumer cards. However, some companies extend these protections as a courtesy or to entice customers.
If you own a limited liability company, keeping your business and personal finances separate is vital to maintaining your personal liability shield. Having different business and personal credit cards is a great way to do that.
A business credit card’s advantages also are apparent when it comes time to pay taxes. For starters, you can deduct interest and fees. Many cards also provide detailed annual expense reports that are useful when preparing your taxes.
A business credit card is a good way to manage business expenses, obtain access to helpful perks, and keep personal expenses separate.
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Once you’ve decided on a business credit card, we’ll help you set up a business bank account in conjunction with our partner, the LendingClub. Then use ZenMoney to manage all your finances in one easy app.
Disclaimer: The content on this page is for information purposes only and does not constitute legal, tax, or accounting advice. If you have specific questions about any of these topics, seek the counsel of a licensed professional.
Written by Team ZenBusiness
ZenBusiness has helped people start, run, and grow over 700,000 dream companies. The editorial team at ZenBusiness has over 20 years of collective small business publishing experience and is composed of business formation experts who are dedicated to empowering and educating entrepreneurs about owning a company.
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