How to Get a Business Credit Card

Opening a business credit card is relatively simple work if you prepare in advance. The first step in how to get a business credit card: make sure your personal credit score is 640 or better. Applying takes minutes, and you don’t even need a taxpayer identification number (TIN) or employer identification number (EIN).

Applying for a business credit card opens up a whole new set of sign-up bonuses and category bonuses to consider. It’s also a great way to keep your business and personal expenses separate, and can give small businesses the spending power they need to grow.

The qualifications for having a business may be lower than you think. Do you sell items on Amazon, eBay or Craigslist? Do you teach music or sports? Ever act as a freelance writer or photographer? If you sell any goods or services, that could qualify you as a business owner.

But if you’re in one of these businesses, how do you go about explaining that on a credit card application? Well, you don’t have to have a registered business like an LLC or a corporation to apply. In fact, when applying for a business credit card, there will be a section asking what kind of business you own, and also requesting your business tax identification number. If you’re just in business on your own, you can choose to answer that you’re a sole proprietor, and in most cases you can enter your social security number as your tax ID/EIN.

What are business credit cards?

While you don’t have to run a company to get one, business credit cards are credit cards specifically geared toward business owners and people who have business expenses. They’re meant to be used for business rather than personal purchases, which can be anything from small expenses for your side hustle to financing your startup idea.

The rewards scheme on business credit cards often reflects this purpose. They may offer extra rewards and bonus points for business-related purchases, which can be anything from printing services to office supplies to advertising fees. Some also offer bonuses on dining and travel, as those are common business purchases.

Who Can Apply for Business Credit Cards?

As you might expect, you must have some sort of business to qualify for a business credit card. If you’re already a small business owner, feel free to skip to the next section.

But if you’re mostly interested in business credit cards for the signup bonuses, you might be wondering whether you, too, could qualify.

Luckily, the definition of “business” is pretty lax. Think back to the past year: Did you hawk jewelry at the local craft fair? Did you do any freelance web design work? Did you sell your old lawnmower on Craigslist?

Any of those activities count as business revenue, and could help you land a business card. If your business hasn’t built business credit yet, don’t worry. Most banks look at your personal credit reports when you apply for a business card, unless your business has already established credit history (even then, they may still check your personal credit too).

How to Apply for Business Credit Cards

If you’ve applied for a personal credit card before, the business credit card application won’t look all that different. It’ll just have some additional fields with questions about your business.

Typically, here’s what you’ll need to provide:

  • Business name: If you have a corporation, LLC, or DBA, use your business name. If you have a sole proprietorship, use your name.
  • Tax Identification Number: You’ll need to provide your Social Security number (SSN), Employer Identification Number (EIN), or both. Though you don’t need an EIN to apply for a business card, they’re free to obtain — and allow you to fill out tax forms and contracts without sharing your SSN.
  • Business type or your role: Select the category that best fits your business, and then write a title that describes your role (founder, owner, CEO, etc.).
  • Contact information: If you have a home-based business, you can use your personal contact info here.
  • Years in business and number of employees: Just starting out? Put zero for years in business, and one for number of employees.
  • Annual revenue: While it can be tempting to exaggerate this number, don’t. Honesty is always the best policy — and banks sometimes ask for paperwork to verify your numbers. You’ll likely include your personal income on your application, too, and if that and your personal credit scores are strong, you have a solid chance of getting approved.
  • Estimated monthly spend: How much you plan to spend on the credit card each month.

You’ll also need to provide standard information about yourself, like your personal income and maybe your monthly housing payment.

If you have a corporation or a registered LLC, you can apply using that information. However, you don’t have to have an LLC. You can also apply as a sole proprietor using your social security number, which is what most freelancers and people with side hustles do.

If you’re applying as a registered corporation or LLC, you can go ahead and include your legal business name and Employer Identification Number or EIN. If you’re applying as a sole proprietor, you can provide your legal name under the business’s legal name field. Instead of providing an EIN in the tax identification number field, you’ll provide your social security number. You can use your home address and personal phone number for the business contact information.

You’ll also need to explain the type of business you’re starting or running, what industry it’s in, and what your role is. You’ll need to state how long you’ve been in business and estimate your annual revenue. You don’t need to be generating a lot of money. In fact, if your business is brand new, you can put “0” for your annual revenue. They’ll also want you to estimate your anticipated spending.

Can You Get a Business Credit Card With Bad Credit?

Most of the best business credit cards will deny your application if you have bad credit. Credit card companies offer secured cards for bad credit borrowers. The best business secured credit cards are cards that will let you use a credit line up to the amount you’ve provided in cash as collateral.

Can I Use a Business Credit Card for Personal Use?

While there’s nothing stopping you from using your business credit card for personal use, we strongly discourage this type of spending behavior. Your personal and business finances should be kept separate to protect you personally from business liability. Using the card for personal purchases complicates all of these transactions and relationships.

How Do I Know if I Need a Personal or Business Credit Card?

Many business owners use both business credit cards and personal credit cards as part of their financial strategy when their business is young. We recommend using a business credit card for your business purchases because it makes your accounting and bookkeeping easier and helps to shield you legally from business liability.

Do business credit cards affect your personal credit? How Business Credit Cards Affect Personal Credit Scores

Once you’re approved, your business card activities generally won’t affect your personal credit scores. 

Out of the major credit card issuers, only Capital One reports all business credit card activity to the personal credit bureaus: TransUnion, Equifax, and Experian. So all the activity will wind up on your personal credit reports. American Express, Chase, and U.S. Bank only report negative information and delinquencies.

That doesn’t mean you should be irresponsible, though; missing payments could cause you to incur late fees and interest charges — and delinquencies could eventually end up on your personal credit reports.

Business credit cards don’t always show up on your personal credit history. Instead, they go on your business credit history. This means that they won’t affect your personal credit score at all.

However, while some credit card issuers don’t report business credit card activity to consumer credit bureaus, others do. This means that their business credit cards would affect your credit score in the same way as any other credit card. If you hold a business credit card with Discover or Capital One, it will affect your personal score. With most other issuers, your business activity won’t affect your personal credit score unless your account is seriously delinquent.

Business Charge Cards

Unlike credit cards, charge cards don’t have a published credit limit. Instead, they have “shadow” limits, which tend to be higher and more flexible than credit card limits. These limits can change over time, depending on your use of the card, credit history, and financial situation — and going over them could freeze your account.

Another big difference with charge cards: You can’t carry a balance, and you must pay your bill in full each month.

These cards can be useful for businesses whose expenses vary greatly, but can be dangerous if you spend more than you can pay off. Not paying the full balance could lead to penalty fees, as well as the inability to make more purchases.

On the other hand, if you need extra motivation to only spend what you can afford, a charge card could be the push you need.

Secured Business Credit Cards

If you’re a business owner with low or no personal credit, a secured credit card might be your only option. With these cards, you put down a deposit (say, $2,000) that serves as your credit line.

Since payments are usually reported to the credit bureaus, they’re a good way to build business credit until you qualify for an unsecured card.

Using a Business Credit Card Effectively

Without a good system in place, it can be difficult to keep track of – and keep a handle on – credit card spending, which ultimately affects your bottom line. Certain strategies can be utilized to ensure good credit card practices. 

Business credit cards with no annual fee

You’ll also have to determine whether you’re willing to pay an annual fee for extra rewards. While most business credit cards do come with an annual fee that’s often waived during the first year, there are a few credit cards with no annual fee. These credit cards offer a lower rewards rate, such as 1% cash back on all purchases, but you don’t run the risk of spending more on fees than you’re earning in rewards.

Business credit cards with big sign-up bonuses

A big perk of getting approved for a business credit card is the chance to qualify for a sign-up bonus, as business credit cards tend to come with some of the best credit card sign-up bonuses out there. While this shouldn’t be the only factor you consider, a generous welcome bonus is certainly a tempting offer.

As long as you have good credit, it’s not difficult to get a business credit card, even if you don’t own a big business. Often, these credit cards offer even better perks and rewards than personal credit cards. Just make sure you’re truthful in your credit card application.

Business Credit Card Pros

Along with providing necessary cash flow to help maintain and build your business, credit cards can offer these advantages:

  • Easier Qualification: It can be easier for business owners who do not have a well-established credit history to qualify for a revolving line of credit with a credit card, rather than a traditional line of credit or bank loan.
  • Convenience: Credit cards are the ultimate in financing convenience. Business owners can quickly access funds for purchases or cash withdrawal, much more easily than having to find cash and/or use a checkbook.
  • Financial Cushion: A credit card can provide business owners with a much-needed financial "cushion" when accounts receivable are behind, or sales are slow and the business is short on cash.
  • Online Ease: Increasingly, business owners make purchases and do business online with vendors, contractors and suppliers. Using a credit card makes online transactions easier.
  • Financial Bookkeeping Assistance: In addition to receiving a monthly statement, most cards provide small business card holders with online record-keeping tools to manage their accounts, including a year-end account summary, which can help a bookkeeper track, categorize and manage expenses. It can simplify bookkeeping, help when using outside professionals to navigate an audit and pay taxes, and provide an easy way to monitor employee spending.
  • Rewards and Incentives: Many cards offer business owners rewards programs – including airline miles and shopping discounts – for using the card. Some also provide "cash back" incentives, repaying cardholders a percentage of their purchases. In short, it can pay to choose carefully.
  • Tool to Build Credit: Responsibly using a small business credit card – which means paying the bill on time, paying more than the minimum due and not going over the credit limit (which can trigger an over-limit fee) – can be an easy way in building up a positive credit report for your business. That, in turn, can help you be more likely to qualify for a loan or line of credit, and at a potentially lower interest rate, in the future. Keep in mind that irresponsible use of a business credit card can damage your credit, however.

Business Credit Card Cons

Before rushing to apply for a business credit card, it's important to consider these potential downsides:

  • More Expensive: The convenience and ease of small business credit cards come at a price: They typically charge a much higher interest rate (1-3% over prime) than a small business loan or fixed line of credit offered by a bank. That interest can add up quickly if card activity is not repaid on time and in full each month. In addition, without a system to regularly and carefully monitor card usage, it can be easy to accidentally overextend your firm financially by going over your firm's credit limit or incurring late fees or penalties. 
  • Personal Legal Liability: Most small business credit cards require a personal-liability agreement (your personal security) to repay debt. This means that any late or nonpayment could result in a negative personal credit report and the inability to personally borrow money. You also may have to pay more with a higher interest rate.
  • Security Issues: Security measures should be created to ensure that cards or card information are not stolen by employees, vendors, contractors and others who come through the office space. It's also important to make sure that employees who are authorized to use the card do not use them for personal spending, and that they take precautions when making online transactions to avoid being hacked.
  • Less Protection: Often, small business credit cards do not carry the same protection as consumer credit cards. For example, many cards will not provide the same level of assured services when disputing billing errors or needing to make merchandise returns. Be sure to review what level of protection and services a card offers before applying.
  • Fluctuating Interest Rates: Unlike a loan or fixed line of credit, the company that issues your credit card can reset the interest rate on your credit card depending on how you use and manage your account. As such, it can pay to be aware of how rates work and can change.

The Best Business Credit Cards

Ready to apply for your business credit card? Amidst all the shiny card offers out there, it can be hard to know which to choose.

In addition to finding a card that matches your credit scores, here are a few things to consider:

  • Intro APR: If you’re just starting out in your new small business, a 0% introductory APR can be very attractive. Many business cards offer this for a year (or more), which means you won’t pay interest while you’re getting your business off the ground. While this can give you some room to breathe, you should strive to pay off the balance before the intro period ends.
  • Rewards: Most business cards have rewards programs that offer miles, cash back, or rewards points you can redeem for statement credits, travel expenses, or gift cards. Find a card that awards extra points wherever you shop most, whether it’s gas stations, car rental agencies, or office supply stores.
  • Signup bonus: Speaking of rewards, you might as well earn a nice signup bonus with your new rewards card. Look for one you can achieve without spending more money than you normally would, and check out some suggestions for meeting minimum spend requirements.
  • FeesTake a look at the annual fees associated with your card, and make sure the rewards are worth it. If you often travel abroad for work — or purchase supplies in a different currency — choose a card without foreign transaction fees.
  • Other benefitsMany cards offer purchase protections, expense tracking, travel insurance, and other perks that save time and money. You should also look for cards that allow you to control employee spending, and that integrate with your accounting software.

Tips to Getting Approved for a Business Credit Card

Getting approved for a business credit card typically comes down to your credit score and your income or business revenue. You may want to improve your credit score and income and reduce your expenses before you apply to qualify for the card you want.

Here are three ways to increase your business credit card approval chances.

1. Improve Your Personal Credit Score

If your credit score is less than 640, then you’ll likely need to improve it before you apply so that you can qualify for the best business credit cards. You can raise your credit score by:

  • Paying bills on your existing credit cards on time
  • Paying down existing credit card debt

Both are important factors in your credit score but managing the amount of available credit you use can have a more immediate impact. Your credit utilization rate — how much credit you use versus how much credit you have available to you — should be below 30%.

2. Grow Your Income or Business Revenue

No matter how good your credit is, you’ll find it difficult to get a large credit line — or approved at all — if you don’t have much business revenue or outside income. You can increase your chances for approval by finding ways to improve your business revenue before you apply. Even signing one large new customer might increase your revenue enough to improve your chances of getting the card you want.

3. Reduce Your Expenses

Some business credit card applications ask you to list your monthly expenses to help the lender understand how much debt you can afford to make payments every month. For many cards, reducing those expenses before you apply may not increase your chances of getting funded, but it can help you increase your credit line if approved. Ultimately, if you’re taking on extra debt, it’s a good idea to reduce these business costs regardless.

References:

[1] How to Get a Business Credit Card in 4 Steps https://fitsmallbusiness.com/how-to-get-a-business-credit-card/

[2] How to Apply for Business Credit Cards (Even If You Don’t Think You Qualify) https://www.creditcardinsider.com/blog/apply-for-business-credit-card/

[3] Do I Need a Business to Get a Business Credit Card? https://thepointsguy.com/news/need-business-for-business-credit-card/

[4] How to Qualify for a Small Business Credit Card (And Why You Should Get One!) https://millionmilesecrets.com/guides/how-to-qualify-for-a-small-business-credit-card-and-why-you-should-get-one/

[5] How to Get a Business Credit Card Without a Business https://www.fool.com/the-ascent/credit-cards/blog/how-to-get-a-business-credit-card-without-a-business/

[6] How to Use Small Business Credit Cards https://www.investopedia.com/credit-cards/how-to-use-small-business-credit-cards/