Should You Invest in a Business Credit Card?

Having a business credit card is optional, but it might be helpful depending on your business and its needs. A company credit card can streamline your daily, monthly, and yearly dealings, helping you keep your income and expenses organized.

If you’re thinking about applying for a business credit card, weigh the perks and downfalls. The following information on how these cards work can help you decide if getting one is a good idea for your venture.

Why do people get business credit cards?

Folks get business credit cards for various reasons, depending on their needs.

For example, the owner of any company will quickly learn that not every client pays as soon as a job is done. In fact, you might wait weeks after completing a job to receive your payment, especially if it’s sent through the mail. In the meantime, you have to purchase supplies, pay for fuel to drive from job to job, and maybe get new equipment. With a business credit card, you can cover these expenses if customer payments run late.

Why not use your personal credit card for business purchases? Well, it’s important to keep your business expenses and income separate from your personal transactions. Doing so streamlines your regular bookkeeping duties and shortens the time spent preparing for tax season.

Can anyone apply?

Even small-scale business owners can apply for a business credit card. If you’re applying specifically for a small-business credit card (as opposed to a corporate credit card), you’ll qualify based on your personal credit history, as Smarty Cents explains.

This means that regardless of whether you’ve run a brick-and-mortar store for years or recently decided to turn your blog into a business, you’ll still have enough credit history to apply.

What are the costs?

Credit card issuers typically charge annual fees and interest. Annual fees vary, depending on the credit limit of each card type — in many cases, the higher the limit, the higher the fee. Some companies waive the introductory fee for the first year and even reduce the interest rate for a period of time. Peruse the terms and conditions — and the fine print — to make the best choice.

A summary of pros and cons

To determine whether getting a credit card is the best move for your business, make a list of the key positive and negative points. Here are a few to get you started:

  • Many credit card companies compete for business by offering you cash back or rewards points. If you travel regularly for your line of work — maybe you’re a diving instructor or a travel blogger — you might benefit from a card that rewards you with points for airfare or hotel stays.
  • It’s an attractive draw if you qualify for a low interest rate. Typically, credit card interest is higher than, say, that of a line of credit; however, a credit card application process can be quicker and easier than applying for more traditional loans. Loans are normally secured, meaning they’re backed by an asset or collateral.
  • Again, it’s wise to use a business credit card to keep your business expenses and income separate from your personal finances, but only if you do so responsibly. It’s no secret that high-interest debt can cause financial hardships that could sink your ship.
  • Since small-business credit cards are tied to your own credit history, they can be useful for helping new businesses get off the ground. However, that also means that your credit history will take a hit if you fail to make a payment. If your business folds, you’ll be personally responsible for any credit card debt. It’s important to make sure your business is in a sound financial situation before taking that risk.

Now that you’re armed with a little information, you’re ready to decide if a business credit card is right for you. For more details on the options available, take a look at some lists compiled by sites like NerdWallet for comparisons of current offers, interest rates, and details regarding payments, late fees, and other charges.


Lorna Hordos

Lorna Hordos is a home-flipping business owner and freelance writer.

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