Small Business Basics: Sign Up For a Business Credit Card

Katie Fleming

Katie Fleming

Co-founder and COO of Owner Actions

A person holds a credit card she obtained for business expenses.

Obtaining a business bank account is important, but you should also consider signing up for a business credit card to track your business spending and simplify the everyday purchases you need for operations.

 

Why do I need a business credit card?

Business credit cards offer many advantages over personal cards. One is that they provide you with a means to spend on business necessities without intermingling your personal purchases. This can be a huge time saver, especially at tax time, when you try to identify and report your business expenses. Many business credit cards also offer bookkeeping software integration, which can help you track and sort your expenses into defined categories.

Two other benefits common to many business credit cards are higher credit limits and sizeable sign-up bonuses.

Sign-up bonuses can be alluring, but it’s important to remember that cash payment bonuses will likely be taxable, making them slightly less attractive than they seem.

Am I eligible for a business credit card?

If you own or operate a business or are a freelance worker, you may be eligible to apply for a business credit card.

 

Does my business need to have a credit history to be approved?

Not necessarily. Most card issuers consider an applicant’s personal credit history in addition to the business’s. The reason is that card companies require applicants to accept personal liability for the charges that are made, regardless of the financial state or outcome of the business.

 

What credit score do I need to access the best credit card options?

The best card options generally require a personal credit score of 690 or greater. You might be able to obtain a credit card with a lower credit score, but it will likely be subject to a higher interest rate or offer a lower credit limit.

 

Will a credit card help my business build credit?

Yes. While you are personally responsible for the balance, your business can get a credit boost from on-time payments, low credit utilization, and the age of your credit card accounts.

 

What are my card options?

Basic credit cards allow you to make purchases and pay or defer portions of your balance, but you might want to obtain a card that provides you with some perks. Consider credit cards that offer one of the following benefits:

 

A low or 0% introductory APR

Most card companies offer business credit cards that allow business owners to finance purchases with little or no interest for a defined period of time (often 12-18 months). Keep in mind that the APR will rise after the introductory period. Both the introductory rate and the rate after the promotional period should be evaluated when making your card selection.

 

Cashback rewards

Card companies offer other cards with cashback rewards, which may be as high as 5% for certain categories of spending and 1-2% for all other purchases. For borrowers who don’t plan to carry a balance, this may be a more enticing option.

 

Travel rewards

Card companies sometimes offer cards that reward points, which are accrued as the cardholder spends on everyday purchases. These points can be redeemed for airline fees, travel costs, and other specified expenses.

 

Keep in mind that many business credit cards have an annual fee, and some have limits on the cashback or point rewards that can be accumulated in a calendar year. Be sure to review the terms and conditions of any card you consider before making a selection.

 

What information will I need to apply?

Requirements vary by card company. Still, but most ask for info that helps them verify spending habits, debts, income, and credit scores. Credit card companies usually ask for personal information from each owner (which will include their name, contact information, birthdate, annual income, social security number, and monthly rent/mortgage payment) and business information (which will include the entity’s industry, operating structure, annual revenue, years of operation, and monthly spending). Businesses that have an employer identification number (EIN) will also need to provide that number.

 

How do I sign up for a business credit card?

Start by checking your personal credit score. You can obtain a free credit report at annualcreditreport.com. Then, check your business’s credit reports through the following credit bureaus:

Each credit bureau uses a different formula to calculate business credit scores. Be sure to check all three reports regularly to know where your business stands.

Finally, decide which kind of incentive you’d like to pursue. You can search the Internet for “0% APR business credit cards,” “cashback business credit cards,” “travel rewards business credit cards,” or “virtual cards” (Divvy is a great one here) to review your current options.

 

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