Do I need a business credit card for my business?

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Dear Business Banter,

May I use a personal card for my new business or is it very important to have a business credit card? I have five different cards right now and I feel I’m pretty set on cards! But if you think I should get another card I will. Thanks for your help.—Amy

Dear Amy,

You’re free to use any of your personal credit cards for your business expenses. With five accounts at your disposal, you may even be able to purchase most (if not all) of the things that your business needs, depending on the credit limits and whether or not you’re carrying any balances.

However, the saying “just because you can doesn’t mean you should,” is applicable here. There are definite upsides to having a business credit card for your venture, and I do recommend that you get at least one. After all, these products were specifically developed for the unique demands of a small business, so they can make your life not just easier, but more profitable.

Here are a few reasons to consider getting a business credit card:

Separate expenses

No matter the type of business you have or how the company is structured, keeping all business spending separate from your household expenses is important. Charging those costs with a credit card that’s designated for business use only will keep you organized and will help you understand the expenses that go into running the business. It will also be useful for accounting purposes and tax deductions, since most business card issuers offer annual itemized reports. It will save you the trouble of having to go through the statements of your personal cards and pulling the information you need.

Large credit line

For many businesses, launching and operating expenditures are often high, and business credit cards can be a great way to cover those costs. Business products tend to have higher credit lines than personal credit cards. The amount you’re eligible for depends on your credit rating and financial capability, but some start out with limits in the tens of thousands, like the Capital One Spark Cash for Business (This card is no longer available), which can begin with a $10,000 to $30,000 line.

New account perks

Since you don’t have a business card yet, you can get a new account that comes with compelling perks. Many have large sign-up bonuses where you can earn a large amount of cash, points or miles for spending a certain amount within a fixed number of months. Chase’s Ink Business Preferred® Credit Card, for instance, has an introductory bonus of 100,000 points (after meeting the $15,000 minimum spend within three months of opening the account), which is worth between $1,000 and $1,250 depending on how you spend them.

Want to borrow for business expenses without being charged any interest? A card with a 0 percent intro APR will be attractive. Just one example is the American Express Blue Business Cash™ Card. With it you can make interest-free purchases for the first 12 months after opening your account.

Tailored rewards

Personal cards are created for personal use, so their rewards programs are designed to fit the spending habits of consumers. On the other hand, business cards allow you to rack up rewards by charging typical business expenses. You’ll want to get the card that suits your business spending the most.

For example, if you buy a lot of things on Amazon Business, you may want to open an Amazon Business Prime American Express Credit Card, because it gives you 5 percent back on U.S. purchases (with an eligible Prime membership). If you charge $20,000 in a year, that amounts to $1,000 back in your pocket.

There are plenty of great small business cards, so scan what’s on offer to identify the card that best matches your company’s requirements. But before you run out and apply, understand the difference between business credit cards and personal credit cards.

A few things to know about business credit cards

Issuers may consider both your personal and business credit scores

To qualify for a business card, the issuer will review your personal credit reports. They should show low debt and a long history of making on-time payments with a number of different credit products. That will result in the high credit scores that most business credit card issuers expect.

In some cases, your business credit reports and scores, such as those produced by Dun & Bradstreet, Experian Business Credit and Equifax Small Business, will also be assessed. Don’t assume you’re ineligible for a business card if you have problematic credit, though. A secured business credit card, such as the Wells Fargo Business Secured Credit Card, can work out. By putting down sufficient collateral, you can get a credit limit of up to $25,000.

Responsibility is the same, protections may not be

Once you have a business credit card you’ll need to treat it carefully. Although it is for your company’s needs, you as an individual will be responsible for the payments and debt.

Another caveat: business credit card issuers do not have to abide by the same consumer protections outlined in the CARD Act that are required for personal cards, such as limited late fees and 45 days’ notice before significantly changing the account terms.

You can use designated personal cards for business

Now, if you do want to stick with your personal cards, that’s fine, too. If so, I strongly recommend you choose one or two that you will only use for your business. They should have enough of a combined open credit line for you to cover all the expenses you need to charge. If they’re rewards cards, pay attention to how you can reap the most cash, points or miles with your charging activity. To build and maintain high credit scores (that you may need for other business loans and cards), send all payments by or before the due date and, whenever possible, zero out the balance.

Written by
Erica Sandberg
Credit And Money Management Expert Contributor
Erica Sandberg is a credit and money management expert who began her career at Consumer Credit Counseling Service (CCCS). There, she helped individuals and families overcome their debt issues and developed budgets, then transitioned into the agency’s primary media spokesperson.