When should you get a business credit card?

Business credit cards provide access to a line of credit that you can use to make company purchases, offering enhanced flexibility along with control and management of your business expenses. Because they’re tailored for business needs, business credit cards often offer valuable benefits and features, such as higher spending limits, detailed reporting, easy-to-earn rewards and the option to issue employee cards.

You’ll find several types of business credit card options, including cash back cards, travel rewards cards, cards with low introductory rates and cards with no annual fee. You might also consider a charge card, which must be paid off in full each month. 

If you’re wondering if you should get a business credit card, read on.

What you’ll learn:

• A business of any size can apply for a business credit card once the company is established and ready to make purchases solely for the organization.

• Benefits of business credit cards typically include higher credit limits than with personal cards, expense management tools, and free employee cards.

• Business credit cards can be used to help manage expenses, cover operating costs, and keep business and personal spending separate. 

• With responsible use, a business credit card can help an organization build credit—but misuse could impact the owner’s personal credit.

You might consider applying for a business credit card once your business is established and you’re regularly making company-related purchases. Understanding when to apply for a business credit card—including how to improve your chances of approval—can help you determine which type of card is right for your company’s needs.

Both new and established organizations may benefit from having a card dedicated solely to business expenses and operating costs. Keep in mind, though: You’ll typically need at least a good credit score to qualify—and it’s a good idea to consider your ability to use the card responsibly and keep the account in good standing.

Business credit cards offer numerous potential benefits to cardholders. Whether your operation is still in the startup phase or has been established for a few years, a business credit card may expand your financial resources, offer enhanced control over your expenses and even help simplify tax reporting.

Here are a few benefits business credit cards may provide to business owners, who, with the help of a business credit card, can:

Your business credit score is an essential factor in your company’s financial wellness. Some business credit cards—such as Capital One business cards—report account activity to one or more credit bureaus, potentially helping you establish or build your business credit score.

Business cards often have higher spending limits than personal cards. This is because issuers consider factors like your personal income, business revenue and personal credit standing when determining eligibility. Those higher spending limits may also come with additional benefits. For example, the Spark Cash Select card offers eligible cardholders the opportunity to earn a spend bonus within the first three months.

Business credit card rewards are designed to match typical business needs and spending habits. For instance, the Spark Miles card offers unlimited 2X miles on every purchase, a $120 credit toward Global Entry or TSA PreCheck® and unlimited 5X miles on hotels, vacation rentals and rental cars booked through Capital One Business Travel.

Some business credit card issuers, including Capital One, allow you to issue employee cards that access the business line of credit. You can often set spending limits or restrict certain transaction types for each employee card, potentially helping keep your business finances on track.

At the end of the year, Capital One business cardholders receive a detailed expense report that helps them categorize and track their spending. This is a common feature of business credit cards, designed to help businesses with accounting and tax preparation efforts.

Business credit cards also help keep your personal and business expenses separate, which makes itemizing those expenses and identifying potential tax deductions simpler at tax time.

Although business credit cards have significant benefits, they do have some drawbacks to keep in mind, including:

When you apply for a business credit card, it’s common for the card issuer to make a hard inquiry on your personal credit report when determining your eligibility. You may also be asked to provide a personal guarantee, where you’re personally liable for any outstanding debts. Actions like late payments could appear on your personal credit report and affect your credit scores, while habits like paying on time could positively impact your personal credit scores.

Business credit cards may offer valuable introductory or promotional periods, but these typically last only for a relatively short time—usually no longer than a year from the date the account was opened.

Some business credit cards may have high annual fees, though the rewards and benefits can often help offset those costs. There are also cards with no annual fees. Additionally, business credit cards may have higher interest rates than some consumer cards.

Distributing employee cards may increase the risk of overspending on the account, but setting limits on the cards can help mitigate that risk. Additionally, managing one or more cards—or several, if you issue employee cards—can increase the risk of a card being misplaced or stolen. Capital One offers security features that allow you to lock missing cards, receive fraud alerts and more.

Here are answers to some frequently asked questions about whether your business should get a credit card.

Business credit cards can be an important tool for keeping business expenses separate and managing them effectively. They can benefit businesses of any size and any age. With features like robust rewards, high credit limits, free employee cards and detailed expense reports, they may help you better manage your business finances and simplify accounting and tax procedures.

If you’re ready to capitalize on the benefits a business credit card may offer, compare business credit cards from Capital One. You can even see if you’re pre-approved, with no impact on your personal credit scores.