Why Every Business Should (and Shouldn’t) Get a Business Credit Card (aka the Benefits of a Business Credit Card)
Running a business means making smart decisions to keep everything running smoothly—especially when it comes to managing finances. One tool that can help and has lots of benefits is a business credit card. However, it’s not always the right move for every business. Here’s a straightforward look at why you might want one, and why in some cases, it might be better to hold off.
Why Your Business Should Get a Business Credit Card
- Keep Business and Personal Finances Separate
This one is HUGE!!! Don’t cross the streams! Mixing personal and business expenses can turn bookkeeping into a nightmare. One of the major benefits of a business credit is that it makes it easy to keep everything separate, so when tax time rolls around, you’re not scrambling to figure out which expenses belong where. Plus, you won’t miss out on business-related deductions. I can’t tell you how much this has saved me come tax time.
- Build Business Credit Like a Pro
Just like personal credit, your business has its own credit score. Using a business credit card responsibly—paying on time, keeping balances low—can help build a solid credit history for your business. A strong business credit score opens the door to better loans, favorable terms with vendors, and bigger opportunities down the road.
- Smooth Out Your Cash Flow
Let’s face it: running a business means dealing with ups and downs in cash flow. A business credit card can give you flexibility during those lean times (or when something unforeseen arises like a pandemic or major fire), letting you pay for essentials now and settle the bill when cash starts flowing again. It’s a great safety net for when things get unpredictable.
- Earn Rewards and Perks
Who doesn’t love rewards? Many business credit cards offer points, cashback, or travel rewards on purchases you’re already making—whether it’s office supplies, travel, or advertising. Those perks add up and can be reinvested into your business or save you money on expenses. Plus, some cards come with extra bonuses like travel insurance or discounts on business services. I have even used my rewards to book international training trips. Yeah… it’s awesome… probably my favorite benefits of a business credit card!
- Simplify Expense Tracking
Forget about stuffing receipts in drawers or trying to remember every little expense. A business credit card provides clear, detailed statements, making it easier to track spending. Many cards even integrate with accounting software, so you can automate your bookkeeping and stay organized. It also helps me avoid dealing with missing receipts from my employees, contractors, and yes, even business partners.
- Higher Credit Limits for Bigger Purchases
Need to make a large purchase? Business credit cards often come with higher credit limits than personal cards, giving you the flexibility to invest in equipment, inventory, or other essentials without draining your cash reserves.
- Control Employee Spending
If you’ve got employees who need to make purchases, a business credit card can help you control their spending. You can issue cards with set limits for each employee, allowing you to monitor expenses and ensure everything stays on budget.
- Fraud Protection
Business credit cards typically come with fraud protection, so if your card gets compromised, you won’t be liable for unauthorized charges. This peace of mind is priceless when you’re focused on growing your business.
When and Why a Business Should NOT Get a Business Credit Card
- Unstable Cash Flow
If your business is struggling with unpredictable or tight cash flow, taking on debt with a credit card might not be the best idea. While it can help cover short-term expenses, failing to pay off the balance could lead to high interest charges that make your financial situation worse.
- Tendency to Overspend
If your business has a habit of overspending or doesn’t have a strict budget in place, a credit card can tempt you to rack up unnecessary debt. Without careful spending, you could quickly find yourself in over your head, which can hurt your business in the long run.
- High-Interest Rates
Business credit cards often come with higher interest rates compared to traditional loans. If you need to borrow large sums of money for major purchases, you might be better off looking into lower-interest options like a business loan or line of credit.
- New Business with No Cash Flow
If your business is still in the early stages and doesn’t have a stable cash flow yet, it might not be the right time to get a credit card. Focus on building a budget and establishing a steady revenue stream before taking on any debt.
- Poor Personal Credit
For small businesses or startups, personal credit often plays a role in business credit card approvals. If your personal credit score is less than stellar, you might face higher interest rates or lower credit limits, which could make the card less useful. It’s better to work on improving your credit before applying.
- Minimal Business Expenses
If your business doesn’t have many recurring expenses or high-cost purchases, a credit card might not offer much value. For smaller operations with low overhead, using cash or debit might be a simpler and more cost-effective approach.
Is a Business Credit Card Right for You?
A business credit card can be a powerful tool for managing your company’s finances, but it’s not for every business. If your cash flow is stable, you have a budget in place, and you’re looking for an easy way to track expenses and earn rewards, it’s worth considering. On the other hand, if your business is still finding its footing financially, or you struggle with overspending, it might be better to wait until your company is in a stronger position before applying for one. The benefits of a business credit card should always outweigh the potential risks!
The key is to weigh the benefits and risks based on your specific business needs. When used responsibly, a business credit card can help you grow, streamline your operations, and even earn some sweet rewards along the way!
And Here Are Some of My Favorite Business Credit Cards:
I have absolutely no affiliation with them (oooo… but maybe I will get this now) and you should always consult a professional for any financial advice.
- Navy Federal GO BIZ®️ Rewards Business
- Depending on if you choose the Visa or Mastercard version, you get big rewards like cell phone insurance, travel services, and discounts.
- Capital One Spark Cash Select
- This is great for new businesses
- Earn 1.5% cash back for your business on every purchase with no limits or category restrictions (even employee cards), plus no fees
- Ink Business Unlimited®️ Credit Card
- Another great one for businesses. 1.5% cashback offer on every purchase with no annual fee
- Chase Sapphire Reserve
- Like to travel? This one was excellent travel perks plus earns you 5x total points on air travel and 10x points on hotels and car rentals. Yes, please!
- American Express Marriott Bonvoy Business
- Also great for travel points, especially if you’re a Marriott person (but even if you’re not).
- American Express Business Prime
- Buy a lot from Amazon? Yeah, me too. This one gives you major cash back on all those Amazon purchases, which really add-up over time. I used my points to buy my entire team’s Christmas party!
- The Platinum Card®️ from American Express
- I do NOT recommend this as a first credit card, but if you’ve been using points and rewards for a while, then this one is amazing! Downside? It has a pretty steep annual fee, but if you actually use the benefits, it really does pay for itself.
BONUS TIPS:
1. Leverage Rewards for Team Perks
Instead of just using rewards for business travel, consider using them to treat your team. Redeem points for gift cards, events, or even fun experiences to boost team morale. 🎉
2. Use Statement Credits for Marketing Expenses
Many cards allow you to use points for statement credits—apply these credits directly to your marketing budget! Let your card pay for that next ad campaign or digital tool. 📈
3. Maximize Introductory 0% APR Offers
If you’re planning a big purchase or investment (like new equipment or a software upgrade), use a card with a 0% APR intro offer. Pay it off before the promo period ends, and you essentially get an interest-free loan! 💡
4. Use the Card as a Negotiation Tool
Some suppliers or vendors offer better payment terms if you use a business credit card. Ask about early payment discounts or extended payment terms when paying with your card. 📊
5. Take Advantage of Travel Insurance Benefits
Even if you’re not booking trips for your team, many business cards include travel protections (like trip cancellation insurance or rental car coverage). It’s perfect for conferences, client visits, or retreats! ✈️
6. Automate Recurring Expenses to Streamline Budgeting
Set up automatic payments for recurring business expenses like software subscriptions, utilities, or even office rent. This helps streamline your budgeting process and ensures nothing gets overlooked. 📅
7. Use Employee Cards for Tracking Specific Budgets
Issue cards to employees with set limits for departments like marketing, travel, or events. This makes it easy to track departmental spending without endless paperwork. 🎯
8. Audit Your Credit Card Benefits Regularly
Many business cards offer perks and benefits that change over time. Schedule a yearly audit to make sure you’re fully using everything the card offers, from purchase protections to cash-back bonuses. 🧐
9. Stack Multiple Cards for Different Perks
Consider using more than one business credit card for different types of spending. For example, one card might offer better rewards for travel, while another gives higher cashback on office supplies. Maximize rewards across different categories! 💳💳
10. Negotiate Your Credit Card Fees
Yes, you can often negotiate your annual fees or get them waived entirely. Call your card provider and ask if there are any promotions or options to reduce or eliminate the fee—especially if you’ve been a long-time customer. 🛠️
11. Build Quick Credit
Do you have regular expenses? The answer is yes. Things like electric bills, phone bills, and internet bills (utilities in general) are great to put on a credit card and pay off every month. This will show consistent use of the card, then consistent paying off of that card. It’s a quick way to build a little credit and show you’re responsible with your card.
WHEW! That’s a LOT!
Who knew there were so many benefits of a business credit card? Want more on building the financial side of your business? Check out my blog on Understanding Your Business by the Numbers.