What is a business credit card and do you need one? (2023)

Corporate credit cards work similar to consumer credit cards and allow you to make purchases on credit and earn valuable rewards and benefits.

The main difference is that corporate credit cards are intended for business expenses, don't always report activity to consumer credit bureaus, and may have specific business benefits. For example, you can issue employee cards for free and view detailed reports of your expenses.

Let's discuss what a business credit card is and why you might want one for your business.

main conclusions

• We recommend taking advantage of corporate credit cards for small business owners because of the rewards and benefits that can come from separating personal and business expenses.
• Many corporate credit cards do not report activity to consumer credit bureaus, such as Experian, Equifax, and TransUnion. However, most business credit card applications use your Social Security number to verify your personal credit score.
• It is not illegal to use business credit cards for personal expenses, but it is likely against the credit card company's agreements.
• Corporate credit cards generally have higher credit limits than consumer credit cards.
• You don't need a large company to qualify for a business credit card. Just about any type of business will work, including many side businesses and freelance jobs.

Business credit card: is it worth it?

What is a business credit card?

A business credit card is a type of credit card designed specifically for business owners. Corporate credit cards share some similarities with consumer credit cards. For example, if a person is using a business or consumer card, a lender is giving them a line of credit as a borrower that they can use to make purchases.

Corporate credit cards come in different categories, including cash back, travel, and low-interest cards. Therefore, you can choose from different types of business cards to find the right option for your business goals.

Business credit cards vs personal credit cards

Despite having some similarities, there are differences betweenbusiness credit cards vs. personal cards.

Business cards usually have some specific benefits, such as offering employee cards. And many business cards have higher credit limits than personal cards to help cover business expenses. You should also use business cards for business purposes only, while you can use consumer credit cards for personal or business expenses.

Generally, you must complete a personal credit check to apply for a business credit card. However, many commercial cards do not report your credit card activity to consumer credit bureaus.

This means that business cards may not help you build a personal credit history, but they can build business credit, which is different. On the other hand, most personal credit cards report your credit activity to Experian, Equifax, and TransUnion, which can help you build your personal credit profile.

How do business credit cards work?

Corporate credit cards work in a similar way to personal credit cards. You usually get a set credit limit and can shop up to your limit.

You're required to pay off your balance each billing cycle to avoid interest charges, and most credit cards carry high interest rates. If you don't pay the balance in full, you can still make minimum payments, but you may still pay some interest.

However, you may have a business credit card that offers0% introductory APRon purchases during a certain period of time. This allows you to avoid interest charges during this period.

How to apply for a business credit card?

You can apply for a business credit card in the same way that you apply for personal credit cards. The easiest way for most people is to use an online application form, but it is possible to complete an in-branch application with some credit card companies.

For example, you often need to include personal information on any application, including your name, date of birth, and Social Security number. It is also common to include your address and total income.

This is where a business credit card application can look a little different than a consumer credit card application.

A business card application may require information related to the business. This includes your business structure, business name, business address, and Employer Identification Number (EIN). There may also be questions about your company's annual revenue and duration of operation.

It may be worth reviewing a business credit card application to find out what information you need before you start filling it out, especially if you have a new business.

learn thebest practices for small credit card orders.

How does a business credit card affect your personal credit?

Most business credit card applications require a personal credit check. That means getting astrong pullor a difficult investigation of one or more of your personal credit reports, which may have a small negative impact on your credit score.

Many credit card issuers do not report business credit card activity to consumer credit bureaus. That is, unless there's a problem with your payment history, like late payments or non-payment. In those and other cases where your business credit card account is not in good standing, your personal credit score may suffer.

Learnwhich business credit cards report to personal credit.

Who should get a business credit card?

We recommend business credit cards for anyone with a qualifying business. Eligible businesses can operate a business, run a restaurant, sell items online, do freelance photography, or freelance writing.

You probably shouldn't get a business credit card (and you may not get one) if you don't have a qualifying business. It also might not make sense to use a business card if you're rebuilding your personal credit score.

Many corporate credit cards require a good credit score, among other factors. A good credit score is at least 670 on the FICO scoring model.

Can you use personal credit cards for business?

When youcompare credit cards, you may find that having a decent credit score and a few other factors can help you benefit from great personal credit card options with valuable rewards and benefits.

But we see corporate credit cards as another opportunity to earn rewards and enjoy valuable benefits. You can use personal and business credit cards at the same time, potentially offering a wide range of benefits and different ways to earn rewards.

A business credit card may offer rewards for specific business-related purchases, such as advertising expenses or office supplies. But a personal credit card can offer more rewards for grocery or gas purchases. Therefore, it might make sense to use both types of cards to maximize your earning potential.

We also believe that business credit cards provide a simple and effective way to help organize your business finances and transactions. You can separate your personal and business expenses and integrate your purchases with business accounting software. And being able to issue employee cards can distribute the responsibilities of your business needs.

Benefits and advantages of business credit cards

• Provide opportunities for more rewards:Many corporate credit cards are connected to rewards programs, offering cash back rewards or travel rewards for qualifying purchases. You can also take advantage of a welcome or registration bonus as a new cardholder.
• Separate business expenses:You can easily separate your personal and business expenses for tax purposes.
• You can work with companies of any size:You don't have to run a large corporation to qualify for a business credit card. A one-person operation, such as a sole proprietorship, may be more than enough if your type of business qualifies.
• It comes in many types of cards:Ofbusiness credit cards with no annual feefortravel business credit cards, there are plenty of business cards to choose from.
• Offers business benefits:Some business cards provide specific business-related benefits. This could include earning bonus rewards on common business expenses, being able to issue employee cards for free, or having credits to use for different types of business services.
• You may have higher credit limits:You may receive a higher credit limit with a business credit card.
• Build business credit history:Many corporate credit cards report activity to business credit bureaus, which can help build business credit. Having better business credit can help you qualify for business loans or other types of credit to help run and grow your business.

Disadvantages of business credit cards

• Not for personal use:It is generally against credit card agreements to use business credit cards for personal expenses.
• It offers specific benefits:Specific business benefits may not apply to all business owners. For example, you may not have any employees and you may not use free employee cards.
• Don't always build your personal credit history:Not all card issuers report commercial card activity to consumer credit bureaus. This can be helpful if you prefer not to have your business credit activity reflected in your personal credit score. But it's not helpful if you're trying to build your personal credit history.
• Are not protected by the CARD Act:The Credit CARD Act of 2009 provides certain protections for consumers with personal credit cards. In general, these protections do not extend to corporate credit cards.

Frequently asked questions about corporate credit cards

Corporate credit cards: bottom line

Corporate credit cards are designed to help small business owners control their business expenses and enjoy specific benefits. This can include the opportunity to issue employee cards for free, as well as integrating business expenses with accounting software to make tax season easier.

Keep in mind that many business credit cards do not report activity to consumer credit bureaus, but you may still need a good personal credit score to qualify for a business card. For our top recommendations, check out our list ofbest business credit cards.