When should you get a business credit card?
Summary
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A business of any size can apply for a business credit card once the company is ready to make purchases solely for the organization.
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Benefits of business credit cards typically include higher credit limits than personal cards, expense management tools and free employee cards.
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Business credit cards can be used to help manage expenses, cover operating costs, and keep business and personal spending separate.
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With responsible use, a business credit card can help an organization build credit—but misuse could negatively 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 can help you determine which type of card is right for your company’s needs. 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.
Keep reading to help you determine whether you should get a business credit card.
10 signs you should get a business credit card
You may be ready for a business credit card if you want to separate your business and personal finances, your company is growing, you’re trying to build business credit and you’re looking for benefits tailored to your organization’s needs.
1. You have business expenses
Once you’ve started incurring regular business expenses, it could be time to apply for a business credit card. That’s because a business credit card can help you track your expenses and keep better records.
At the end of the year, many business cardholders receive a detailed expense report designed to help them categorize and track their spending for accounting and tax preparation. Capital One Business account holders receive these reports and also have free access to the Expense Management feature.
2. You’re earning consistent revenue
Once you’ve begun earning consistent revenue, you may be in a better position to use a business credit card responsibly. It can become a useful tool for managing cash flow and covering everyday business expenses.
3. You’re ready to separate business and personal finances
Business credit cards also help keep your business and personal expenses separate, which makes itemizing those expenses and identifying potential tax deductions simpler at tax time.
4. You need to cover larger business expenses
Business credit cards can help you finance larger expenses, like inventory or equipment, as they often have higher spending limits than personal credit cards. This is because issuers consider factors like your personal income, business revenue and personal credit standing when determining eligibility.
5. You have a good personal credit score
Business credit card issuers often consider your personal credit score when determining your eligibility. A good personal credit score increases your chance of qualifying for a business credit card with better terms.
6. You’re ready to build business credit
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. With responsible use, a business credit card can help you establish or build your business credit score.
7. You want business-grade rewards and benefits
Business credit card rewards are designed to match typical business needs and spending habits. Rewards could include unlimited cash back or miles on everyday business spending, travel benefits like travel insurance and access to airport lounges, and early spend bonuses.
For instance, Capital One Venture Business offers:
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Unlimited 2X miles on every purchase
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Unlimited 5X miles on hotels, vacation rentals and rental cars booked through Capital One Business Travel
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An annual $50 travel credit for bookings through Capital One Business Travel
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Up to a $120 credit for Global Entry or TSA PreCheck® every 4 years
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An annual $50 statement credit for purchases at qualifying advertising or software merchants
8. You have employees
Some business credit card issuers, including Capital One Business, allow you to issue employee cards that access a business line of credit. This can be helpful if you’re looking to provide a convenient way for your staff to make purchases without establishing a reimbursement process. You can often set spending limits or restrict certain transaction types for each employee card, potentially helping keep your business finances on track.
9. You are looking for streamlined tools
Some business credit card issuers, like Capital One Business, offer other free tools like Accounts Payable, to make vendor payments easier while earning rewards and enjoying fraud protection.
10. Your travel needs have increased
If you find that you’re traveling more for your company, you might consider applying for a business credit card. This could be particularly useful if the card offers elevated travel benefits or the option to earn miles on business spending, so you can get rewarded for the way you travel.
Getting a business credit card FAQ
Here are answers to some frequently asked questions about whether your business should get a credit card.
What are the drawbacks of a business credit card?
Business credit cards have some drawbacks to keep in mind as you’ll typically need good personal credit scores to qualify—and these scores could be temporarily impacted when you apply. Additionally, some business credit cards may have annual fees, and liability can differ depending on the card.
What can I use my business credit card for?
Business credit cards can be used for business expenses like:
- Office supplies
- Equipment
- Inventory
- Subscriptions
- Advertising
- Training
- Travel expenses
Can I use my EIN to get a business credit card?
Yes, you can typically use an Employer Identification Number (EIN) instead of your Social Security number to apply for certain types of business credit cards, but you may need to provide some additional information, like a proven track record as an established business entity. You may also need to meet certain requirements regarding credit level and show you have sufficient cash flow or funds on hand.
Should I get a business credit card for my LLC?
Yes, an LLC can benefit from a business credit card. Businesses of all sizes—including LLCs—can leverage credit cards to help improve cash flow, get cash back or earn travel rewards when used responsibly.
Key takeaways
Business credit cards can be an important tool that can make your day-to-day easier—while helping grow your business. They can benefit businesses of any size and any age and can help keep business and personal expenses separate. 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 Business. You can even see whether you’re pre-approved, with no impact on your personal credit score.
