For any business, managing finances effectively is essential to growth and success. One powerful tool that business owners can utilize to streamline expenses, earn rewards, and build credit is a business credit card. But with the variety of options available, selecting the right card can be overwhelming. In this guide, we’ll cover the benefits of using business credit cards, factors to consider when choosing the best option, and some of the top business credit cards available today.
Why Consider a Business Credit Card?
Business credit cards offer a range of advantages that can help streamline financial management and support business growth. Here are some of the main benefits:
- Separation of Personal and Business Expenses: A business credit card makes it easier to keep business and personal finances separate. This separation simplifies bookkeeping and makes tax preparation much more straightforward.
- Builds Business Credit: Responsible use of a business credit card can help a business build its credit profile, making it easier to secure financing and favorable terms on future loans.
- Rewards and Cash Back: Many business credit cards offer rewards on everyday expenses. These rewards could include cash back, points, or miles that can be redeemed for travel, office supplies, and other business essentials.
- Expense Management: Business credit cards often come with tools that help track spending by category and provide detailed monthly statements. Some cards even offer integration with accounting software, making it easier to manage cash flow.
- Access to Higher Credit Limits: Business credit cards generally offer higher credit limits compared to personal credit cards. This can be useful for covering larger expenses and managing cash flow more effectively.
- Employee Cards: Many business credit cards allow owners to provide cards to employees. This feature can help control and monitor spending, as business owners can set individual limits for each employee.
Key Features to Look for in a Business Credit Card
When choosing a business credit card, it’s essential to find one that aligns with your company’s financial needs and spending patterns.
- Rewards Program: Identify your business’s primary spending categories. For example, if travel is a big part of your expenses, a card with travel rewards or airline miles may be ideal. For everyday purchases, a cash-back card could offer the most value.
- Introductory Offers: Many business credit cards offer welcome bonuses or promotional 0% APR periods. These offers can provide significant upfront value if you have planned expenses or if you’re looking to finance a large purchase.
- Annual Fees: Some business credit cards come with annual fees that may range from $95 to $500 or more, especially for premium cards. Evaluate the benefits against the cost of the fee to ensure you’re getting good value.
- Interest Rates: Look at the APR (Annual Percentage Rate) for the card. While paying off balances monthly is ideal, having a lower interest rate can be beneficial if you occasionally carry a balance.
- Foreign Transaction Fees: If your business makes purchases abroad or frequently engages in international transactions, consider a card with no foreign transaction fees to avoid additional costs.
- Employee Card Options: Consider whether the card allows for free employee cards and if you can set spending limits. Employee cards can streamline expenses, but it’s essential to have control features to manage spending.
Top Business Credit Cards to Consider
While the best business credit card will depend on your unique business needs, here are some popular options that cater to a range of requirements:
- Chase Ink Business Preferred® Credit Card
- Rewards: 3x points on travel, shipping, internet, cable, and phone services, and advertising purchases (on the first $150,000 spent annually).
- Welcome Bonus: 100,000 points after spending $15,000 in the first three months.
- Annual Fee: $95
- Best For: Businesses with significant travel and advertising expenses.
- American Express® Business Gold Card
- Rewards: 4x points on the top two categories where your business spends the most each billing cycle.
- Welcome Bonus: 70,000 points after spending $10,000 in the first three months.
- Annual Fee: $295
- Best For: Customizable rewards for high spending in specific categories.
- Capital One Spark Cash Plus
- Rewards: 2% cash back on all purchases.
- Welcome Bonus: $1,000 cash bonus after spending $10,000 in the first three months.
- Annual Fee: $150
- Best For: Businesses seeking simple, flat-rate cash-back rewards.
- Bank of America® Business Advantage Customized Cash Rewards Mastercard®
- Rewards: 3% cash back on a category of your choice, 2% on dining, and 1% on all other purchases.
- Welcome Bonus: $300 statement credit after spending $3,000 in the first 90 days.
- Annual Fee: None
- Best For: Businesses that want no annual fee and customizable rewards.
- Brex Card for Startups
- Rewards: Points based on spending categories, with 7x on rideshares and 4x on travel booked through Brex.
- Credit Requirements: No personal guarantee required.
- Best For: Tech startups and businesses with substantial venture capital backing.
Tips for Maximizing Business Credit Card Benefits
To get the most out of your business credit card, consider these strategies:
- Choose the Right Card for Your Spending: Match the card to your spending habits. If travel is a big expense, focus on cards with travel rewards. For diverse spending, opt for cards with customizable categories.
- Take Advantage of Introductory Offers: If your card offers a welcome bonus, make a spending plan to meet the required amount within the promotional period. These bonuses can provide substantial value.
- Monitor Spending: Use the card’s tracking and reporting features to analyze spending patterns. This data can help in budgeting and identifying areas for cost savings.
- Leverage Employee Cards: Issue cards to trusted employees to simplify expenses. Setting individual limits helps control spending while enabling employees to manage business costs effectively.
- Avoid Interest Fees: Pay off the balance in full each month to avoid interest charges. If you need to carry a balance occasionally, look for a card with a lower APR or a 0% introductory APR.
- Redeem Rewards Strategically: Consider how rewards align with your business needs. Cash back can be reinvested in the business, while travel rewards may reduce expenses on business trips.
Common Questions About Business Credit Cards
- Can I apply for a business credit card if I’m a sole proprietor?
- Yes, sole proprietors can apply for business credit cards. You may need to provide your Social Security number instead of an Employer Identification Number (EIN) during the application process.
- Do business credit cards affect personal credit?
- Some business credit cards may report activity to personal credit bureaus, particularly if you’re the primary account holder. Responsible use can have a positive effect, while missed payments could impact your credit score.
- Are business credit card rewards taxable?
- Generally, rewards earned through business spending are not considered taxable. However, any cash-back rewards used to reduce expenses should be accounted for in your business records.
Conclusion
Business credit cards are a valuable resource for managing expenses, earning rewards, and building credit. Whether you’re looking for a card with travel perks, cash back on everyday purchases, or tools to manage employee spending, there’s a business credit card that suits your needs. Take the time to evaluate your spending habits, desired rewards, and financial goals to find the best business credit card for your company.
Using a business credit card strategically can lead to significant savings, improve cash flow, and simplify financial management. With the right card, you’ll have a tool that supports your business’s growth and success.
