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A business credit card: why and how?

A web designer uses a laptop to pay bills online with a credit card.

Deciding whether or not to get a business credit card can feel like a daunting decision. However, it doesn’t have to be. In this guide, we will walk through what exactly a business credit card is, the advantages and disadvantages of having one, and everything else you need to know.

What is a business credit card?

Business credit cards help keep small businesses running smoothly. Designed specifically for business use, they’re an easy way to cover expenses ranging from utilities to business travel, and from software to client lunches. They allow you to keep business expenses separate from personal expenses–which undoubtedly makes tax season easier. They also help free up cash by offering features to help you spread out costs, track expenses, and keep an eye on employee spending. And by using them to pay for major expenses, you can accumulate more rewards.

How do they work?

For starters, it must be noted that in order to open a business credit card for you and your employees, you must first have a business bank account. A good rule of thumb is that as soon as you start accepting or spending money as a business, you should open a business bank account. Once your account is opened, you can apply for a credit card.

Business credit cards work similarly to personal cards. You can pay your business bills and charge purchases to your card, and you get a statement at the end of each billing cycle with the balance owed and minimum amount due. If you pay your bill in full every month, you won’t have to pay interest.   

However, some business credit cards are charge cards–which means full payment is required at the end of the month. Charge cards tend to not have credit limits which can be attractive to larger, more established businesses with substantial monthly expenses.

Business or personal card?

What are the disadvantages of using a personal bank account or credit card for business transactions?

  • Tax time nightmare: When April rolls around and you need to declare income and business expenses, you will have to manually separate your personal and business transactions. This will be the ultimate time suck.
  • Lack of professionalism: Writing a check using your name suggests that you’re not a serious business.
  • You might lose clients: To ensure they’re in line with company rules, some clients may refuse to send payments to personal accounts.
  • Higher chances of fraud: Since you’d be using your business account for a large number of transactions, the chances of fraudulent activity would be higher. If you have a separate business account, you can limit the possible damage to that account.

What are the key differences between personal credit cards and business credit cards?

Higher chances of fraud: Since you’d be using your business account for a large number of transactions, the chances of fraudulent activity would be higher. If you have a separate business account, you can limit the possible damage to that account.

  1. Credit limits: Business credit cards often come with higher credit limits than personal credit cards, giving your business more spending power and flexibility. Credit card issuers take both personal income and business revenue into account when determining your credit limit.
  2. APR: An APR rate (annual percentage rate) is the cost you pay each year to borrow money. Personal credit cards frequently offer introductory 0% APR periods lasting 15 months or longer for purchases and balance transfers. Business cards tend to offer shorter 0% APR periods, typically applying only to purchases and not to balance transfers.
  3. Record keeping: Many business cards offer itemized spending reports split up by each individual employee, thereby simplifying tracking processes. Personal credit card reports typically aren’t as detailed.
  4. Rewards categories: Certain rewards categories like cashback are offered on both personal and business credit cards. However, business credit cards tend to also offer rewards programs designed to allow business owners to earn in places where they spend most–think phone bills and travel expenses.
  5. Card protections: Business credit cards are not monitored and controlled as closely as personal credit cards are. Congress passed the Card Act of 2009 to regulate credit card issuers in the U.S. And while this act was a victory for personal credit card holders, its protections typically don’t apply to your business. If your business credit card is stolen, for example, you might be held responsible for any of the charges resulting from the theft.

What are the advantages of a business credit card?

Benefits of using credit card, including establishing your company credit, higher credit limits, tracking business spending, card perks, and employee cards.

  • Establish your company credit: Building a good payment history will help you improve your company’s credit score. Improving your personal credit score will allow you to borrow more money at lower interest rates and can even positively affect insurance and rental property rates down the road. 
  • Higher credit limits: Because these cards are designed for business use, they typically have a higher credit limit than a personal card.  
  • Track business spending: Business credit cards allow you to separate out your personal expenses from your business expenses. This helps you keep a more up-to-date eye on spending and also helps you get tax reports in order.
  • Perks: Most business cards offer more perks than personal cards and cater to expenses most often incurred by businesses, not individuals. This includes frequent flyer programs, airline lounge memberships, and hotel discounts. If you don’t do a lot of business travel, a card heavy on cashback rewards may be best. 
  • Employee cards: You can add employees to your business credit card and authorize them to make specific business purchases. You can easily track and limit their spending and accumulate rewards on their purchases. Employee cards also simplify business spending—gone are the days where you had to reimburse employees who used their personal credit cards for business expenses.


What are the disadvantages of a business credit card?

  • Higher interest rates: Credit card companies charge higher interest rates for business credit cards than other types of loans. Interest adds up quickly if bills aren’t paid in full or on time.
  • Expensive annual fees: Annual fees for business credit cards are generally more expensive than those of personal cards. Plus, their late fees are significantly higher.
  • Impact on your personal credit: If you have high balance on your card and don’t pay it on time, the card issuer will forward this information to the consumer credit bureaus (organizations that provide information on an individual’s bill paying habits. Lenders use this info to evaluate creditworthiness). This will negatively impact your personal credit score.
  • Guarantees: Some business credit card providers require a guarantee which is typically linked to your personal assets. It’s important to be aware that you will be held liable if your company is unable to pay the debt.
  • Less protections: Business card owners receive less protections than personal card owners. This means you need to go the extra mile to prevent credit card theft so you are never put in a position of having to cover fraudulent charges.

How to choose a credit card for your business

What should I look out for when comparing business credit cards?

  • Annual fee: Annual fees often cover the cost of membership benefits. It’s a good idea to calculate how much you’ll need to spend in order to offset the annual fee. 
  • Intro and ongoing APR: Many credit card issuers offer intro APR. Take into account how long that lower interest rate applies. It’s also important to consider the ongoing APR rate. APRs are determined based on your creditworthiness which means the lowest interest rate advertised may not be what you end up getting. 
  • Financing options: Decide whether a charge card or a regular credit card makes more sense for your business. As touched upon above, the key difference between the two is that a charge card needs to be paid in full at the end of each month while regular credit cards allow you to carry a balance with interest.
  • Benefits: It’s no secret that different credit cards come with different benefits. It’s a good idea to compare these offerings and decide which programs offer benefits that are most in line with your business’s needs. Specific benefits to compare include rewards, special financing options, purchase protection and insurance, luxury perks, and account management tools.

How do I get a business credit card?

Step 1: Assess your eligibility

Approval for a business credit card is largely based on your personal credit score so newer businesses have the same shot as more established companies. Most issuers require excellent credit to get a business credit card. Looking over your personal credit report is a great way to assess your eligibility before beginning the application process.

Step 2: Do some solid research

Look into which business cards meet your needs the most. As you compare cards, be sure to also look at:

  • Foreign transaction fees.
  • Balance transfer fees if you’re planning on transferring a balance to the card. 
  • Promotional APR.
  • Regular purchase APR.
  • Balance transfer APR.
  • Penalty fees and APR.

Step 3: Apply for your card

Once you select the right business credit card for you and your business, you should gather the required information to include in your application. Application requirements feature a combination of personal and business details including:

  • Your personal name and email
  • Your business name
  • Legal structure
  • Industry type
  • Number of employees
  • Your location
  • Annual revenue
  • Your social security number (SSN) or employee identification number (EIN). 

The card issuer may have follow up questions for you during the verification process. Most important of all—be sure to give honest and updated answers throughout the process.

Step 4: Wait for the decision

Your credit issuer may take up to 10 business days to make a final decision, and it could take an additional 7-10 days to receive the physical card in the mail. Once you submit your application, you can monitor your email (and mailbox) for answers, and you can also log into your online portal or call customer service for a status update.

The bottom line

Business credit cards can help you smooth out your business operations and give you rewards that fit your business’s needs. They allow you to easily separate work and personal expenses, better manage business expenses, and build a healthy business credit score which can unlock important financial resources.

If you end up deciding that a business credit card is right for you, be sure to put in the research to determine what’s most important to you and your business. You’re around the corner for finding the perfect financing solution!

Pay your bills with your business credit card. Collect points and rewards.Learn more

*This guide is intended for informational purposes only and is not intended as financial advice.
**Melio does not provide legal, tax or accounting advice, and you should consult with a professional advisor before making any financial decisions.