Overview of Business Credit Cards
Credit cards often get a bad rap, but that credit card sitting in your wallet can actually be a great way to fund your business. In fact, business credit cards are cheaper than many other forms of business financing, and you can benefit from features like rewards programs and low introductory rates.
Free Guide To
Small Business Financing
How Business Credit Cards Work
Credit cards come in two types: consumer and business. You can use either kind to fund business expenses. If your primary goal is to save money on interest, then we recommend a consumer card because they typically have longer 0 % APR promotional periods and lower interest rates. However, if you want to build up your business’ commercial credit score or take advantage of business-specific rewards programs, then it’s best to get a business card.
Whether you get a consumer or business card, using a credit card is as easy as swiping it at the point of purchase. There are some things to keep in mind, however, to minimize the costs and maximize the benefits of credit card usage:
Treat credit cards like a loan. Make regular payments to keep your balance in check. Failing to do this is what gets a lot of people into credit card debt. Try to keep your balance to no more than 30 % of your credit limit. If you need to to keep a larger balance, at least try to make more than the minimum payment each month.
Keep business partner(s) in the loop. You and your partner should set aside a fixed amount of monthly business revenue to pay down the credit card balance.
Use different credit cards for different reasons. Need to consolidate debt? Get a card with 0 % APR and no balance transfer fees for a limited time. Need a card for everyday business purchases? Choose a good rewards/cash back card. If you don’t have a lot of money coming into your business, get a card with no annual fee.
Maximize your credit line. The biggest constraint of using a credit card is that you’re limited to your credit line. If the credit card company doesn’t do so on their own, ask them to raise your limit every 1-2 years. If you have a good history of making payments on time, they’ll probably raise it.
If you have a personal credit score above 680 (check your score for free here), you can take advantage of a financing product called credit card stacking. This combines the credit lines of several different cards to get you one low-rate, unsecured business line of credit. This is a good option for people that are starting a new business.
Will I Qualify for Business Credit Cards?
In general, you’ll need a credit score above 660 to qualify for a good credit card. You can check your credit score for free here. Anything below that, and you’ll probably only qualify for a prepaid card or a secured credit card. You have to load prepaid and secured cards with money, so they don’t give you the flexibility of a regular credit card.
Cost of Business Credit Cards
A credit card is like a loan in the sense that you borrow money and pay it back later. However, unlike a loan, there’s no fixed due date to pay back the balance. There is a minimum monthly payment, and interest keeps accruing on unpaid balances.
Interest on a credit card is described in terms of an Annual Percentage Rate (APR). The average APR for business credit cards is currently around 16 % and a point or two lower for consumer credit cards.
Keep in mind that the APR that is charged for purchases may be different from the APR charged for balance transfers and cash advances. If you are more than 60 days late on a payment, you may be subject to a higher penalty APR. If there is a 0 % APR promotion, the normal APR will be restored at the end of the promotional period.
Our Recommended Credit Cards
Best business credit card: US Bank Business Edge Cash Rewards
Best for low credit scores: Capital One Spark
Best rewards credit card: American Express Gold
More small business credit card options: Here
Maximum Loan Amount
Depends on your credit limit
Minimum monthly payment
8 - 24%
As fast as 1 business day
Have a question?
Fast way to purchase business essentials and easy to use
Cheaper than short-term loans and other non-bank sources of business capital
Rewards and cashback let you earn money for charging purchases to the card
Limited time 0 % APR promos on purchases and balance transfers let you save money and pay down debt
Need above 600 credit score to qualify for a good business credit card
Balance can pile up if you’re not diligent; need decent cash flow to pay it down each month
Most business credit cards charge late fees and penalty APRs if you don’t pay on time
You’re limited to your credit line, so you can’t use credit cards for very large purchases
Finding funding for a small business can be daunting. A Google search for “small business loan” brings up 180 million results! In part, this is because the last few years have seen a surge in business financing options. Nonetheless, some approaches stand the test of time. Here are 3 lessons you can learn from how […] Read More