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Why you need a separate credit card for business expenses

minute read

    When you begin to scale your business, you'll most likely need financing. There are multiple ways to finance your business, but in this article, we're going to focus on business credit cards.

    When you open a small business credit card account, you not only get access to a credit line, but many cards come with rewards and perks that may make your dollars stretch a bit further.

    Below we'll share some of the more impactful benefits of having a small business credit card, as well as some tips on how to choose one.

    What is a business credit card?

    A business credit card is similar to a personal credit card, but with rewards and benefits that cater to small businesses. When used responsibly, these cards can help you finance the growing needs of your business.

    What are the benefits of having a small business credit card?

    Below are six benefits of small business credit cards. When maximized, these benefits may translate into real value for your business.

    Finance business purchases

    If you don't have cash on hand, business credit cards can be a helpful way to kickstart growth by providing access to financing. This credit allows you to invest in the systems and equipment you need to in order to pursue your business goals. Some cards even offer zero annual percentage rate (APR) for an introductory period.

    Improve business cash flow

    A business credit card may help business owners manage cash flow effectively. These cards generally come with higher credit limits than personal credit cards, because businesses often have larger, more frequent purchases that sustain their operations. Monthly or even weekly replenishment of supplies or inventory can deplete your cash reserves quickly. When budgets are tight, a credit card can make it possible to purchase something important during unpredictable sales seasons when you need to weather the ups and downs.

    In addition, some business credit cards offer online dashboards that provide insight into your due dates, transaction history, open balances and more. This visibility into your cash flow could help you plan your payments strategically.

    Earn credit card rewards for your small business

    Many business credit cards offer travel rewards or cash back on purchases made with participating partners in categories that cater to growing businesses. This means, for example, that every time you buy gas for your company car, fly across the country for a sales meeting, purchase new laptops for your employees or buy supplies in bulk – you may be able to earn rewards. Rewards can then be redeemed for things like cash back, travel rebates, gift cards and more.

    Keep business and personal finances separate

    Having a dedicated credit card for your business means you can keep your business expenses separate from your personal spending. This can make things easier during tax season and for general record-keeping. It also helps keep things cleaner and more organized.

    In addition, it reduces the risk to your personal assets and personal credit score. There are important legal protections to corporations and LLCs that safeguard your personal assets in the event that your business is sued or goes bankrupt. If you mix your business and personal finances, this may water down those protections, making it difficult to untangle what is part of the company and what is personal. And you certainly don't want to risk maxing out or defaulting on your personal credit card in order to finance your business. This could put your personal credit score at risk.

    Build a business credit score

    At some point, you may consider financing the growth of your business through a business loan. When you responsibly use a business credit card by paying at least your minimum payment each billing cycle, you start to build a business credit score. This business credit score, similar to your personal credit score, is a way for lenders to assess your creditworthiness. Improved creditworthiness, which means you're trustworthy to repay your debt, could lead to future financing opportunities with more attractive terms. This may include a higher credit limit and a lower APR.

    Employee credit cards

    Employee credit cards can provide a convenient solution for managing company-wide expenses — and you might be able to earn rewards while doing so! When implemented successfully, businesses can streamline expense management, simplify accounting and maintain transparency and control. In addition, employees generally prefer having this option for making purchases on behalf of the company because it's less paperwork than reimbursing the expense.

    Choosing a small business credit card that's right for you

    The small business credit card that is right for you depends largely on your financial situation and your business objectives. But there are also a few other factors to consider when choosing one.

    • What are your monthly expenses? Consider how much money you spend on travel, client meetings, office supplies, and other expenses and use that information to understand the type of card you choose.
    • Which rewards offer value to your business? Consider rewards programs and which best fit your business's needs or offer rewards in categories that line up with your most common business expenses. Don't choose a credit card with high-interest rates or high-annual fees just to get rewards.
    • Is the annual fee worth it? Determine if you'll be able to maximize the rewards benefits and justify the annual fee.
    • Will the benefits be helpful? Evaluate additional benefits, such as travel insurance or purchase protection, and if they're helpful to your business.
    • Is there a compelling introductory offer? Consider intro offers, such as 0% APR or welcome bonus points. Confirm if there is a spending requirement within the first few months in order to receive those bonus points.

    In summary

    Business credit cards can be valuable tools to finance your growth, manage your expenses and monitor cash flow. In addition, many business credit cards offer valuable rewards and benefits geared specifically to businesses.

    If you're looking for a good place to start with a business credit card, you may want to consider the Chase Ink Business Preferred® Credit Card. Not only does this card offer bonus rewards in popular businessspending categories, but you may also get a sign-up bonus if you reach the spend minimum within a certain period of time.

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