Capital One, Chase, American Express – these are all credit cards on the market. You can use them for your personal finances, but you can also use them for your business finances. 

What Is a Business Credit Card?

To go back to the basics, a credit card itself gives you a credit limit, usually based on your credit history, and you’re able to spend any amount up to that limit. By using a credit card, you don’t spend your actual money until you go to pay it off, usually monthly. The amount you spend, however, acquires interest. Most business credit cards currently have an average interest rate of around 18.31%, according to  Wallet Hub. 

As for the business side of having a credit card, this gives you the ability to separate personal and business finances. It also gives your business a way to use credit for short-term expenses. If you have employees who regularly do work outside the business, take clients to lunch, or do handy work, having a business card can eliminate the need to compensate them for spending their personal money, making things easier as a business owner.

Why Do You Need a Business Credit Card?

Getting a business credit card can help build a profile and improve your chances of getting credit or loans in the future, along with helping you to get better borrowing terms. Just like a personal credit card, you can use it to buy short-term needs or provide a cushion for emergencies. It’s also usually a good idea to keep your business and personal finances separate, so using a company credit card is ideal if you want to separate the two for tax and legal purposes. This way, you don’t mix up your business debt with your personal ones, and you can keep organized.

And, as mentioned before, if you’re going to be doing a lot of client meetings or relying on employees to buy supplies, giving them a business credit card can save time and paperwork. If you own a small restaurant but rely on a manager to keep the place running, giving that manager access to a business card to make purchases on behalf of the business makes operations easier. If a light fixture needs replacing, or a window needs repair, having a business card can cover those costs all while making their purchase simpler. 

How Do You Get One?

Most lending institutions offer business credit cards, and the process is similar to the application for a personal credit card. Sometimes, you’ll have to back the business credit card with a personal guarantee, which is similar to a guarantor agreement or a collateral agreement. This will hold the individual applying for the card liable if the business defaults on payments, and could affect your personal credit score if that’s the case.  

You can get a business credit card using your personal Social Security number if your business doesn’t yet have an employer identification number. Card issuers will underwrite the application using the same process as they would for a personal credit card application.

As with most credit cards, they’ll have higher interest rates than other types of borrowing. Lines of credit will have lower interest rates but are very similar to credit cards. Definitely explore your options if you have a different type of spending in mind.

Which Business Credit Card Should You Get?

The type of card you should get depends on your business needs, your credit history, and several other factors. Your best options will vary, but Nerd Wallet’s top four business credit card recommendations are American Express’s SimplyCash Plus, Capital One’s Spark Cash for Business, Chase’s Ink Business Preferred and American Express’s Blue Business Plus.

These are just suggestions, and your best options will vary depending on the factors mentioned above. 

Keep In Mind

Every business should probably have some sort of business credit card, but remember that it’s suited best for certain kinds of purchases. Credit cards have higher interest rates than other forms of debt, so they should usually only be used for small purchases. Lines of credit are another good option that’s very similar to a credit card but with lower interest rates. They aren’t as easy to qualify for, but can provide a good working capital cushion if that’s what your business needs. 

Business credit cards are great ways to build credit, however. If you have a newer company and want to qualify for loans in the future, a credit card is an easy way to use small purchases to build credit. 

Never use a credit card for what a loan should be used for. If you’re looking to invest in a large purchase, such as for equipment or real estate, consider a business loan like a term loan or an SBA loan.  

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