8 Things To Know Before You Get A Business Credit Card (2024)

Business credit cards offer a convenient way to make big purchases like office furniture, equipment or manufacturing materials. But every business owner—from sole proprietors to corporate CEOs—should know that business cards work differently than personal credit cards. Liability protections, eligibility and rewards can vary from card to card, and not all individual consumer protections extend to businesses.

What Is a Business Credit Card?

A business credit card is typically tailored for anyone who owns a business. Large company owners and operators, sole proprietors and anyone in between can be eligible for a business card. Having employees or an office is not required.

Business credit cards are generally meant to be used for business expenses, like purchasing supplies, office furniture or travel. New businesses should be careful about using credit cards to spend money not yet earned or in the bank. Many business cards have some kind of stipulation in the terms and conditions that prohibit cardholders from using these cards for personal expenses.

Having a business card is useful for building business credit, which lenders and other banks will look at if a business owner ever applies for a business loan. Some cards offer short-term financing useful for large purchases.

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Credit Score ranges are based on FICO® credit scoring. This is just one scoring method and a credit card issuer may use another method when considering your application. These are provided as guidelines only and approval is not guaranteed.

Who Qualifies for Business Credit Cards?

Most business owners can qualify for a business card as long as the owner has good to excellent personal credit and the desire to keep their personal and business expenses separate. Having a storefront or lots of employees is not required, but demonstrated income may be required to get a better card.

Qualifying business owners include:

• Sole proprietors
• Freelancers
• Small business owners
• Large business owners
• Limited liability companies
• Corporations

Here’s what business owners should know before applying for a business credit card.

1. Business Credit Is Different Than Personal Credit

Most adult Americans have credit scores and credit histories. Taking out loans, signing up for credit cards and even paying for utilities can impact personal credit.

Business owners also have a form of credit called business credit. This lets potential lenders and credit card issuers know how responsible a business owner is with business debts. Card issuers look at both personal and business credit history to decide whether someone qualifies for a credit card and what the credit limit for a new line of credit will be. Issuers may report card activity to business credit bureaus, including Dun & Bradstreet, Experian Business Credit and Equifax Small Business.

Small business owners or sole proprietors with no business credit history may want to consider applying for a secured business card that reports to at least one of the business credit bureaus. This way, a business owner can build up decent credit before applying for a more popular card with better rewards.

2. A Business Doesn’t Have To Be Registered or Incorporated

Sole proprietors, freelancers and partnerships can all qualify for a business credit card. The business doesn’t have to be incorporated or registered to benefit from business credit. Having an Employer Identification Number (EIN) is also not required, although it may be helpful when applying for a higher-end business card.

Independent, unincorporated or unregistered business owners should be aware that they are personally liable for any and all debt related to their business cards.

3. Business Cards Don’t Have the Same Liability Protections as Personal Cards

The CARD Act of 2009 gave personal credit cardholders protections like zero liability in case of fraud, a 21-day grace period to pay back purchases and required notice of increasing interest rates. Business cards, however, are technically exempt from these protections. Some business cards follow these guidelines anyway, but it’s important to always understand a card’s terms and conditions before applying.

In addition to cardholder protections, there are two types of debt liability that apply to business cards: commercial liability and joint and several liability.

Large businesses and corporations with corporate cards can usually enjoy commercial liability, which means that the business itself (not the cardholder) is liable for debts should a creditor come knocking.

Small business owners and independent proprietors may have joint and several liability on their card meaning both the business and the cardholder are liable for debts. The cardholder could take a hit on his or her personal credit score and even have debt sent to a collections agency. Paying the bill on time every month will help the cardholder avoid being personally responsible for business expenses (and interest).

4. Business Cards Have Rewards, Too—Some Tailored to Business Expenses

Like personal credit cards, some business cards offer rewards to cardholders—like cash back, travel rewards and welcome bonuses. Some business cards may even offer short-term financing for large purchases, which is helpful for a new business trying to get off the ground.

When trying to decide which business card is the right one, look at what types of rewards are offered. Low introductory APR periods can be helpful for building good business credit without racking up interest on large purchases. Rewards points or cash back can be redeemed for business travel, office supplies or gift cards for employees. Purchase protections like extended warranties and return protection are useful for buying new equipment and furniture.

Keep in mind: Any purchase made using cash back or rewards points may not be entirely tax-deductible as a business expense. Consult your tax professional to learn more.

5. Business Card Applications Require More Information Than Personal Card Applications

Business credit card applications typically ask for similar personal information required for a personal credit card application, like name, date of birth, Social Security number and address. Business card applications also require information related to the business itself, like name of business, industry, EIN (if applicable) and revenue.

A business card issuer will look at all the information provided in the application plus the applicant’s personal and business credit history to decide whether the business and its owner will be a reliable borrower. Having good to excellent personal credit is recommended to qualify for the best business cards with the best rewards.

Before applying to any business card, always read the terms and qualifying conditions first. Applying for too many cards in a short period of time can reduce the applicant’s credit score, making it harder to qualify for a different card or other type of loan.

6. Business Cards Usually Have Higher Credit Limits Than Personal Cards

Because businesses have larger monthly expenses (and larger incomes) than regular consumers do, business cards tend to have higher credit limits—sometimes in the ballpark of an extra zero. The issuer will decide what a card’s credit limit will be after analyzing a business owner’s application and credit history.

Small business owners tend to have higher credit than average consumers, which may also contribute to the higher credit limit trend among small businesses. Business cardholders can request higher credit limits at any time by contacting a card issuer.

7. Employees Can Have Their Own Credit Cards

Most business card issuers allow cardholders to order credit cards for employees. Issuers may provide a few employee cards for free while other issuers may charge a fee per card.

Many cards allow the primary cardholder to oversee employee spending by setting spending limits, alerts for card activity and even card limits. Keep in mind that employee business cards may have joint and several liability, which means the employee and business owner may be equally responsible for the card’s debt.

8. Business Cards May Have Different Payment Terms Than Personal Cards

Card issuers recognize that businesses don’t always have cash on hand to pay for large purchases. Some cards offer extended payment options that allow the cardholder to finance large purchases with special terms. Cardholders may be able to pay off the purchase over a longer period of time without accruing interest or without accruing the card’s full interest.

Payment terms vary depending on the issuer and card. A business cardholder should call his or her card issuer to discuss payment options.

Bottom Line

Owning a business credit card has similarities to owning a personal credit card, but key differences exist that every business owner should understand. Business credit cards are useful for building business credit, earning rewards and keeping overhead low by making large purchases with special financing.

Try not to double-up on perks between a business card and a personal card. Choose cards that will give you a variety of rewards and perks that are beneficial to your business. And, just like with any personal card, don’t overspend on a business card.