What to look for in a small business credit card
Quick insights
- Small businesses (LLCs, partnerships, sole proprietors, freelancers and more) are generally eligible to apply for small business credit cards.
- Credit card features such as the rewards program, fee structure and availability of expense management tools may be worth considering.
- Business credit card applicants usually need to provide their Social Security number (SSN) and sign a personal guarantee.
As a small business owner, you may know that selecting a business credit card is a decision that could impact your bottom line. To help maximize the benefits, you may want to consider applying for a business credit card that complements your business needs and financial habits.
Below, we’ll cover some of the business credit card features and terms that could potentially help offset costs, streamline expense management and limit unwanted charges and fees for small business owners.
Small business credit card features to consider
Generally, business credit cards can help drive growth for small businesses by providing a line of credit and separating business and personal expenses. Some credit cards come with additional features that may benefit small businesses, such as a rewards program and complimentary employee credit cards.
Here are a few features you may want to look for:
Rewards and benefits that match your spending
Some business credit cards offer rewards in the form of points or cash back on eligible purchases, which may help you offset costs. The card could earn rewards at a flat rate or offer accelerated points earning potential in select spending categories. For example, a credit card might offer 3x points for every dollar spent on hotels or flights.
Some business credit cards have a small-business friendly rewards program, allowing you to earn rewards on spending categories like internet and phone services, office supplies, advertising and travel. A business credit card with spending categories that match your purchasing habits may help you maximize rewards.
Another way to earn points is through a welcome bonus offer, which allows new cardmembers to earn points if they spend a certain amount of money within a set timeframe after the credit card account is opened.
Here are a few other benefits some business credit cards offer:
- Statement credits as reimbursement for eligible expenses
- Airport lounge access
- Travel and purchase protection benefits, like auto rental coverage and extended warranty protection
- Discounts with select vendors
Low APR and fees to minimize unwanted costs
While business credit cards can help you earn rewards, there’s also the potential to incur unwanted costs. Any charges associated with the credit card are listed in its terms.
Credit cards typically charge interest on any balance that is carried over from one month to the next. The interest charges are calculated based on the card’s annual percentage rate (APR), which is the yearly interest rate that determines the cost of borrowing money on the card.
When a high APR is applied to an outstanding balance, there are more interest charges over time. As interest is compounded, interest is charged on both the initial balance and any previously accrued interest. Credit cards may have different types of APRs with different rates for purchases, cash advances and balance transfers.
Some business credit cards offer a low APR during an introductory promotional period, which may be beneficial for new or small businesses seeking to help drive growth and manage cash flow.
In addition to the APR, there are several potential fees you could be charged:
- Balance transfer fee: Charged when transferring a balance from one credit card to another.
- Annual fee: A yearly charge that some credit card issuers impose for using the credit card, often associated with cards offering more rewards.
- Late payment fee: A penalty for not making at least the minimum payment by the due date.
- Foreign transaction fee: Charged on purchases made in foreign currency or through a foreign bank, typically calculated as a percentage of the purchase amount.
As these costs can add up, you may want to consider the fee structure and APRs when applying for business credit cards.
Expense management tools to streamline bookkeeping
Aside from helping to keep business and personal expenses separate, some business credit cards may assist with expense management, providing tools that help you gain visibility into and exercise control over your business’s spending habits.
Many business credit cards integrate with accounting software, potentially making it easier to import transaction data and handle bookkeeping. Some cards provide detailed transaction reports that categorize expenses, which may help you make informed decisions about how to allocate resources.
Employee cards to limit manual reimbursements
Some business credit cards offer complimentary employee credit cards, allowing employees to use credit cards to make purchases on behalf of the business. The primary cardmember is responsible for charges from employee credit cards and may be able to set up spending limits on them.
Potential benefits of employee credit cards include:
- Track employee expenses in real time to monitor and control spending.
- Allow employees to make purchases without waiting for reimbursement.
- Reduce administrative burden by limiting manual reimbursement.
- Enable both primary and employee cardmembers to arrange their own travel if the credit card issuer offers a travel booking portal.
- Earn rewards for the account on purchases made by employee cardmembers.
Businesses can create an employee credit card policy to help provide guidance to employees on card usage and limit risk.
Business credit cards for small businesses
Business credit cards are typically designed for small to medium-sized businesses. Many small business owners—including LLCs, partnerships, sole proprietors, freelancers, temporary workers and independent contractors—are usually eligible to apply for small business credit cards.
That could potentially include dog walkers, personal trainers, freelance graphic designers and more. However, approval can depend on a variety of factors like your personal income, creditworthiness and business revenue.
In many cases, applying for a business credit card involves providing your SSN and signing a personal guarantee, which holds you personally liable for the card’s balance.
You can usually also provide your Employer Identification Number (EIN)—a unique 9-digit identifier from the Internal Revenue Service (IRS)—on your application if you have one. If you’re approved and use the card wisely, it may be a first step toward establishing and building your business’s credit score.
In summary
You may find business credit cards with features that align with your small business’s needs and financial habits. As you evaluate your options, you may want to consider how the card’s rewards, APR and fees are structured, as well as the availability of expense management tools and employee credit cards. Many small businesses—from LLCs to partnerships to freelancers—may be eligible to apply for a business credit card.
