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While it may seem that selecting a credit card for your business is just a small decision among many, the right card can deliver important benefits. We look at some features to help you select that right card, define terms that may impact your decision, and provide tips for choosing cards in specific categories.

Why Use a Business Credit Card?

It's possible to charge business expenses to your personal card, i.e., consumer card. If you're the sole employee and organized in tracking business-specific expenses, this is an option for a season. However, there are several benefits to getting a business credit card for your business. Some of these include:

  • Establishing your business credit: According to the Wall Street Journal's Guide "How to Pick a Credit Card for Your Business," it can be easier for a start-up business to open a credit card account than to secure a line of credit with a bank. So, a first step in establishing your business credit history may be opening that credit card account and consistently paying on time.

  • Accessing higher credit limits: Business cards often have higher credit limits than personal cards as financial institutions recognize that businesses can have large expenditures.

  • Keeping business expenses separate and easily trackable: By keeping your business spending on your business card you have a built-in system for tracking expenditures. Some card services offer online tools that track your spending by category. This can save you time and money when working with your accountant to monitor expenses and deductions.

  • Providing cards for employees: Another way to help your business organize and track finances is for employees to use a business card for business-related purchases.

  • Receiving benefits and perks that suit your business: It's likely that your business needs differ from your personal needs. By selecting a card to suit your business, you can find the rewards programs and perks that fit best.

One word of caution: The CARD Act (Credit Card Accountability and Disclosure Act of 2009) doesn't apply to business cards. That means the limits on how and when credit card companies can charge fees and raise interest rates aren't a legal requirement for business cards. It's important to read the terms, and pay in full and on time, to avoid penalties.

Picking the Card with Features that Fit Your Business

There's much to review when selecting a business credit card. There isn't one "best" option, because business needs vary. Here are some considerations to help you choose:

  • Need for a Personal Guarantee: While it may be easier to get a business credit card than a business loan, you still must demonstrate the ability to pay off your balance. During the application process, the credit card issuer may consider both your business and personal credit scores. If business credit history isn't established or isn't good, you may need to make a personal guarantee that if your business can't pay the bill, you'll use personal funds to cover it. Even if your business's credit score is good, some cards may still require your personal guarantee, which can then impact your personal credit score.

  • Interest rate vs. grace period: A first step is to assess your business spending habits. Take time to consider how you spend, the amount you spend and your ability to pay in a timely manner. Be realistic. If you'll carry a balance, prioritize low interest rates. If you plan to pay off purchases within a billing cycle, look at cards with longer grace periods (time before interest is applied) and good rewards programs.

  • Rewards: Rewards programs give you points for your spending, which you can apply towards things like airline miles or cash back. If you and your employees travel a lot, airline miles may be a good reward. If not, consider cash back. In both cases, read the terms to understand the process, terms and if you'll get different levels of rewards based on different types of purchases. Then pick the program that best aligns with how you spend.

  • Perks: In addition to rewards programs, cards may offer other perks like sign-up bonuses, introductory 0% APR, insurance coverage for car rentals, airport lounge access, and discounts at particular hotels, restaurants or retailers. Select the perks that will most benefit your business.

  • Protections: Since business cards are not covered by the CARD Act you may want to consider cards that extend the types of protections from this regulation to business customers. 

  • Fees: Many types of fees can be assessed against your account. It's important to review these and understand the potential impact. In the section below, we explain some key terminology.  

A Basic Look at Business Credit Card Fees

As you review terms it's important to understand fees. A definition of APR is a good place to start. Simply put, APR or annual percentage rate is the fee you must pay for borrowing money from your financial institution. Interest compounds daily against the balance you carry on your card if you don't pay the full balance within the allotted grace period (this time frame varies by card but is, on average, 25 days).

Here are some brief explanations for the most common fees:

  • Introductory APR = a low or even 0% interest charged for a finite time.

  • Regular APR = the interest rate you will pay after the introductory period ends.

  • Finance charge = interest charged on any balance you carry beyond the stated grace period.

  • Late fee = a flat fee charged if you don't pay your minimum payment by the due date.

  • Over-the-limit fee = a flat fee incurred if you charge in excess of your credit limit.

  • Annual fee = a yearly fee for the use of the card. Not all cards have this. Some wave the fee for the first year.

  • Balance transfer fee = a percentage or flat fee charged against balances moved to this card from other credit cards.

  • Cash advance fee = can be charged in a few circumstances, including when you use your card to take out cash, overdraft protection kicks in, or you use a convenience check from your credit card account. These transactions may also be subject to higher interest rates.

  • Foreign transaction fees = applies if you make a purchase in a foreign currency.

  • Expedited payment fee = is charged when you make a last-minute payment by phone to avoid late payment.

  • Returned check/returned payment fees = the fee you incur if your bank returns your card payment due to insufficient funds in your bank account.

How to Find the Best Business Credit Card for Specific Needs

Your circumstances or business needs may have you looking for the best card in a specific category. Here are some tips to point you in the right direction:

  • Finding a travel rewards card: If you prioritize travel benefits, compare cards that focus on travel rewards programs. Look at introductory APR, regular APR, welcome offers (aka sign-up bonus), rewards rates (e.g., 1x, 2x, 3x), annual fees, and perks (e.g., access to airport lounges, credit for TSA Pre-check and Global Entry, help achieving elite member status with hotels and airlines, etc.). Read the terms so you're clear on the restrictions.   See the best  Travel Rewards Credit Cards here.

  • How to get a good business credit card with an average or fair credit rating: If your score is average or fair, look for a card that has good odds for approval and no annual fee, according to WalletHub, a financial advice site, and be willing to lower your rewards program expectations. See the Best Credit Card for Average Credit.

  • Assessing the best card for balance transfers: If you already have high-interest credit card debt that you want to pay off, finding a card with low or 0% financing can be a great way to do it. Keep in mind that you may incur fees upon transferring your balance. Even seemingly small fees - 3% for example - can add up, so be sure to calculate the cost of the transfer before you commit to it. If you do transfer the balance to a very low (or 0%) introductory interest rate card,  make sure you can pay off the balance before the introductory period ends.  See the Best Credit Card for Balance Transfer.