In a NutshellOwning a small business is stressful enough without worrying if you should use a personal credit card or one geared toward the business community. Here's a quick and easy guide.
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Small business owners may be able to use a personal credit card to run their business, but a business credit card could have special perks and features that you don’t want to miss.
Here are some of our best picks:
|Ink Business Preferred℠ Credit Card||Best for businesses with a lot of expenses|
|SimplyCash® Plus Business Credit Card from American Express||Best business card with no annual fee|
|Capital One® Spark® Cash for Business||Best simple cash back business card|
|The Business Platinum® Card from American Express OPEN||Best for jet-setting business owners|
Some business owners use a personal card as their “business card” without a problem. But if you have employees, are planning to grow your business or anticipate needing access to a higher line of credit or loan in the future, a business credit card could be a better option.
Even if you don’t identify with those scenarios, business credit cards may have perks that better align with your spending and lifestyle as a business owner.
Still unsure whether you’re better off with a personal or business card? Here are some key benefits of using a business credit card.
1. A business card can make recordkeeping easier
Whether you’re applying for a loan or preparing to file your tax return, having well-organized records can save you time and money (particularly if you’re paying an accountant to get everything in order for you).
William McDevitt, a Certified Public Accountant (CPA) with Wilkin and Guttenplan P.C. in New Jersey, says if you intermingle business and personal expenses you could have to manually go over the account at the end of the year and figure out which expenses are deductible. He also points out that “if you are audited, you need to support the deductibility of those business expenses.”
A business card’s online portal or app might help. Some let you tag or label purchases, add a note to the purchase and attach a picture of your receipt that you can easily pull up later.
If you decide to use a personal credit card for your business, there’s no difference from a tax perspective, according to McDevitt. However, you may want to only use it for business expenses to avoid potential confusion or problems later.
2. Business cards can help you build business credit
A personal credit card generally can’t help you build business credit, though your business and personal credit may be linked. Using a business credit card and paying the bill on time is one way to help build your business’s credit.
Your personal credit can determine your eligibility for financial products, such as loans or credit cards, as well as the interest rate or terms you’re offered. Similarly, your business credit can impact your business’s ability to qualify for loans, credit lines, terms from vendors and equipment or office leases.
Your business credit can also impact how much you’ll pay for business insurance. If you’re a sole proprietor, your personal credit may also be considered when you apply for business-related financial products.
Be careful about missing a business credit card payment as it could hurt both your business and personal credit. Some business card issuers report card use to the consumer credit bureaus, who compile the information your personal credit scores are based on. Also, you may be held liable for the debt if you signed a personal guarantee.
As with personal credit, building your business credit can take time. Opening and using a business credit card is a simple way to get started.
3. Business cards may offer business-specific benefits
Personal credit cards often offer a variety of benefits. They could protect you from paying for fraudulent purchases, offer a rewards program and give additional perks such as rental car insurance or free access to airport lounges.
Business credit cards often offer similar benefits, but they’re tailored to the needs of business owners. For example, your card could come with:
Free employee cards. You can give your employees a card so they can easily make purchases on the business’s behalf. You may be able to monitor their spending and control where they can use the card and how much they spend.
Business-specific rewards programs. You could get a card that offers cash back rewards on shipping, advertising and other common business purchases.
Higher-limit purchase protection. With purchase protection, the card’s issuer may be willing to reimburse you if an item you buy is damaged or stolen. Personal cards may offer this perk, but business cards could cover more expensive purchases.
Finding the right business credit card
Decided you want to open a business credit card? Now you have to choose which card you want.
To narrow down the options, consider how you plan to use the card, how much you regularly spend on business expenses and which perks may be beneficial. Also consider the fees and terms of each potential card, including the annual fee and interest rate.
If your business doesn’t have a lot of expenses and you primarily want a business card to separate your finances, earn some rewards and build business credit, SimplyCash® Plus Business Credit Card from American Express might be a good fit. The card doesn’t have an annual fee and you can earn up to 5 percent back on purchases at U.S. office supply stores and wireless telephone services purchased directly from U.S. service providers.
However, if you spend thousands of dollars each month, you may want a business card with a rewards program that aligns with your business expenses, such as the Ink Business Preferred℠ Credit Card. Using this card, you’ll earn 3 points per dollar spent (up to a combined $150,000 each year) on travel; shipping; internet, cable and phone services; and social-media and search-engine advertising.
Once you choose a card, submit your application (using your business’s EIN if you have one) and you may have the card shortly.
To recap, here are our top picks with Credit Karma reviews and card details:
Best for businesses with a lot of expenses
Best business card with no annual fee
Best simple cash back business card
Best for jet-setting business owners
You may be able to use a personal credit card to run your business, but business cards are often a better choice because they offer perks and rewards programs that were created with business owners in mind.
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