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Business Credit Cards: 67% of all businesses already using them. Are you?

According to one study about 67% of small businesses today currently use business credit cards. You might be wondering if using one will be a good idea for your business. Of course, business owners also want to figure out how different it is from using other forms of credit.

Top 4 Business Credit Cards

Visa Credit Card

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Visa Credit Card

Cum sociis natoque penatibus et magnis parturient. Pro vel nibh et elit mollis commodo et nec augue

Visa Credit Card

Cum sociis natoque penatibus et magnis parturient. Pro vel nibh et elit mollis commodo et nec augue

Visa Credit Card

Cum sociis natoque penatibus et magnis parturient. Pro vel nibh et elit mollis commodo et nec augue

So, Why Get a Business Credit Card?

Business credit cards offer a convenient way to access short term financing and provide for the needs of your company. It also adds to the purchasing power of your company. Studies also show that about 37% of small businesses today use business credit cards for that very purpose.

If you rank the options, then that is actually the second most used method of getting credit for any business. The number one method on the list is traditional lines of credit, of course. That statistic is from a study conducted by the National Small Business Association.

It might sound like a good idea and the convenience of an instant credit line that you can tap on a monthly basis is certainly top notch. However, just like any sort of financing that your business can use, you should remember that it also comes at a cost. Bottom line, you should learn to manage this line of credit as well or else you risk your boat sinking before you know it.

How Different Is It From Other Credit Cards?


Just like a consumer credit card, business credit cards provide your business with a revolving line of credit. It also has a credit limit set to it. You can also use it to withdraw cash (or make a cash advance) or you can just use it to purchase different items.

Just like a consumer credit card, it also charges account holders (well, this time your business is the account holder) a certain amount of interest if a balance remains after each billing period.

That also means your business will be working with the credit card’s business cycle. There are also a plethora of credit card issuers around, banks included in the many options. Business credit cards applications can be processed in person, via the internet, or by mail.

As you can see, these credit cards are very much like a consumer credit card. It presents you with the option to separate your personal credit use from that of your business. That way you can keep your personal and business expenses separate.

Traditional Line of Credit vs. Business Credit Cards

You may have seen the offers for these credit cards in your business mail. The offers usually portray these credit cards as an attractive alternative to all the usual credit lines that you have been using for your business.

There are a few differences that you should be aware of before you sign up for one. First off, traditional credit lines will offer you with a loan and a fixed interest rate. On the other hand, a credit card for your business represents a revolving credit line.


On the one hand, you have a one-time transaction. Once you fulfill that loan, you will have to apply for a new one. On the other hand, a credit card for your business allows you to make a loan every month without the hassle of a regular application. If you fully pay your bill at the end of the month, you get a fresh credit line.

That’s one point for credit cards for businesses – that’s where they have an upper hand. However convenient that may sound, it does have one flaw. The size of your credit using these cards isn’t that big compared to traditional credit lines.

Size of Financing

Traditional lines of credit will always offer larger amount of financing – something that you can’t get out of any kind of credit card. If you need to make a substantial purchase – like maybe for purchasing large pieces of equipment, then traditional financing or credit lines is a better option for you.

On top of that, these loans tend to cost you less money since the interest charged for these loans isn’t that big.


Score one for traditional credit lines. Don’t celebrate just yet. Here’s the tie breaker, actually. We all know that you need some sort of security or collateral to offer traditional credit lines before you qualify for a loan.

Sure, your business may have a few assets that you can use. You sometimes have to sacrifice some of your personal assets just to qualify for that loan. This is where business credit cards take another point – they don’t require any form of collateral.

This means that the loans that you receive from credit card issuers are unsecured. There is no asset necessary to guaranteed by the borrower – aka your business.

The only guarantee that you have given, as the owner of the business, is that of a personal nature. You personally guarantee that you will meet your obligations after the credit card issuer provides you with the financing.

Pros and Cons of Business Credit Cards


Now, before you take that business credit cards offer you should know the pros and cons. Getting a business credit card carries its own risk. Your business can benefit from it and of course you can also drive your business deep in debt by it as well. Let’s start with the benefits:


The Pros:

  • It’s easier to qualify for a credit card: you only need to pass a minimum set of qualifications so you can get a credit card. It is definitely a lot easier for businesses to qualify for one. If you are a business owner who hasn’t yet established a solid credit history, this can be a viable option for you.
  • Most banks will turn you down when you apply for a loan. A traditional line of credit will also require some form of capital. If your business doesn’t have any sizeable assets to serve as collateral then chances are your loan won’t get approved. You don’t get that much hassle when you apply for new business credit cards.
  • Much needed financial cushion: these credit cards can be used to provide business owners a much needed financial cushion. There will be times when you will need cash and you won’t have any on hand.
  • This sometimes happens when your receivables fall behind and your cash flow has been put out of sync. Sometimes these things happen when sales are slow. The extra 25 to 55 days that you can get from using a business credit card is a welcome extension that you can take advantage of.
  • Financing convenience: as stated earlier, using a credit card for your business operations is a bit of convenience that any business owner should take advantage of. It’s not free credit and it may not be as big as the loan that your bank usually offers, but it’s something that you can work with just to keep your business operations going.
  • It is actually much easier compared to other modes of payment. You don’t have to part with your cash at the moment – especially if you need it for something else. It’s also easier to manage compared to a checkbook.
  • The ease of online transactions: businesses today take advantage of the convenience of the internet. A lot of business transactions are done online nowadays from initiating orders, contacting contractors, following up with vendors, and checking with suppliers.
  • Incentives and rewards: a lot of these business credit cards offers include rewards programs. You get shopping discounts, airline miles, and cash back incentives for using the credit card.
  • Bookkeeping tools online: you would be familiar with the monthly statements that are sent by credit card issuers. That is a pretty useful document in case you want to keep your records up to date.
  • But that is not the only tool provided by credit card companies. If you use business credit cards online then you can take advantage of the online record keeping tools provided by credit card issuers.
  • These tools can help your bookkeeper manage your accounts, categorize your expenses, and even create year end summaries. Keeping your records update is made much easier. You can arrange for your taxes to be paid as well as perform regular scheduled audits.
  • Helps to build your credit: if you are up to date with your payments, you pay your bills on time and you pay more than the minimum amount that is due on your statement, then you are slowly building a good credit history. You are actually building up a solid and positive credit report for your business.
  • That actually helps you a lot in the long run. You will eventually be more qualified for a loan or a line of credit. You may also be able to get a lower interest rate in the future.

Business Credit Card Cons:

  • These credit cards are actually more expensive: the ease and convenience that you get out of these credit cards usually comes with a price. Nothing is free in this world – so even the added perks can be costly.


Note that the interest rate on these credit cards is pretty steep when compared to commercial or consumer credit cards. In fact, the interest rate on these cards is higher than the rates for a business loan from the bank. Don’t be surprised if you find that the interest rate on your credit card to fall anywhere from 1% to 3% over the prime rates. Expect those interest rates to pile up whenever you have balances and are late with your payments.


  • Personal liability: you as the business owner will have to take on a personal legal liability. Part of the business credit card processing is for you to sign an agreement where you provide a personal security. That means, as the business owner, you take responsibility any amount of money owed that your business is unable to pay.
  • Any negative repercussions also reflect back to you. That means you will also get a negative credit report and the bank may also use this as a grounds not to loan you money.
  • They offer less protection: a lot of times, business credit cards will not carry the same amount of protection as regular consumer credit cards. A lot of these credit cards for businesses do not have the same assured services whenever you want to dispute errors in your bill or whenever you need to return any merchandise. It is important that you review what level of protection is offered by a credit card before you sign up for one.
  • Security Issues: since the account holder of this card is technically your business, you may allow your employees to use the company credit card for official transactions. However, that exposes you to more risk since it can be used for personal spending. Create measures and precautions to prevent that from happening.
  • Sometimes the interest rates on these cards fluctuate: this means that the interest rates on your credit card can go up or down depending on how you use it. If you are able to pay your dues on time then expect the rates to go down. However, you should see higher interest rates whenever you have outstanding balances or if you are late with your payments.

Using Business Credit Cards Efficiently

So you get several business credit cards offers in the mail. The first step is to read the fine print and make sure you understand the terms included with each card. Some will have a rewards program and cash back offers – so keep an eye on those credit cards with such offers.

The Requirements: You should then pay attention to the business credit cards requirements. Are you qualified for that particular credit card? Is there a competing credit card that offers lower interest rates? Check the APR and compare them.

Credit Card Comparison: The next thing you should check out is business credit cards reviews. See what other business owners have experienced while using these credit cards. These are important steps on how to get business credit cards.

Accountability System: You should setup a system of accountability even before your new business credit cards arrive. The terms of your policy should tolerate no exceptions; they should be rigorous, consistent, yet fair.

Policies like pre-approval of all expenditures using the credit card, a strict requirement on the submission of receipts, a timely reporting of credit card use and activity, and pulling the credit card from employees who do not commit to the policy increases the awareness about how serious your company is when it comes to credit card stewardship.

Remember that just handing the credit card over to your employees will be the same as just giving them a blank check. At the end of the day you pay for everything that was spent – even if what was included in the bill are their personal expenses.

Credit Card Stewardship: Another thing that you should think about is which employee gets to carry the card. Even business gurus acknowledge how difficult it is to select an employee who is worthy of your trust. This is in spite of measures and policies already in place.

Some companies just issued too many credit cards to too many employees. Note that not everyone in your office will need the convenience of a business credit card. Giving everyone in your company a company credit card will eventually result to dysfunctional expenditure.

Establish factors for selection when deciding who will get a company credit card. It can be based on seniority, job requirements, an employee’s position in the company or other factors. After a careful selection, make sure that they fully understand the policies on company credit card use (e.g. no receipt means you get no reimbursement – they pay for the items on the bill that haven’t been reported).

You Should Set Certain Limits: note that not every expense should be charged to the company credit card. The types of expenditures using the company card should be spelled out. The spending policies should be put into writing and those who have access to company cards should sign an agreement.

The pre-approval of any credit card spending should also be put in place. Spending limits and the size of each expense can be categorized. If you have set a $5,000 credit limit for each credit card, there shouldn’t be single expenses or transactions that will use the entire limit or even a 5th of that amount – adjust the figures according to your employees’ needs.

If you do not set these limits and if there are no policies clearly in place, then it will be easy for your employees to justify any expense. That includes even the ones you do not originally intend to cover – like an employee’s personal expenses.

The limits you set will not only cover the amount of the expenditure. Depending on the company credit card you sign up for, you should be able to set dollar amounts, categories of expenses, and days and times when the credit card can be used.

Credit Card Activity Alerts: some business credit cards can set up text message alerts every time someone uses a company credit card. If you don’t want to be bothered by text messages then you can set up warning emails instead. The system can alert you whenever an employee uses the card for unauthorized expenses (e.g. expenses in the wrong category such as groceries, etc.)

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