Should I get a business credit card?

Business credit cards offer enhanced flexibility, control and management of your business expenses. Because they’re tailored for business needs, business credit cards often provide valuable benefits and features, such as high spending limits, detailed reporting, easy-to-earn rewards and the option to issue employee cards.

If you’re wondering if you should get a business credit card, here’s what to consider.

What you’ll learn:

• Business credit cards work similar to personal credit cards but are designed to help streamline finances for businesses of all sizes.
• Types of business credit cards include those that offer cash back, travel rewards, introductory 0% APR, no annual fee and more.
• Some benefits of business credit cards include higher credit limits, expense management tools and free employee cards.
• With responsible use, a business credit card can help an organization establish a credit score—but misuse could impact the owner’s personal credit. 

Business credit cards work comparatively similar to personal credit cards. You’ll have access to a line of credit that you can use to make routine company purchases. And you’ll receive a statement at the end of the month detailing your account total and minimum payment due. Some business cards are charge cards, which must be paid off in full each month. Others may let you carry a balance but typically with interest. 

You can use your business card to purchase items that can be considered a legitimate business expense. They’re often smaller, routine purchases like:

• Office supplies 
• Subscriptions 
• Trainings 
• Travel expenses

Traditionally, business credit cards should only be used for business expenses. Your credit card issuer will likely have a clause in your contract stating that your card can’t be used for personal expenses. Keep in mind that using your business card for personal purchases may violate terms and conditions and result in the closing of your account. Plus, it can make itemizing or deducting items for accounting or tax purposes more difficult. 

Business credit cards offer numerous potential benefits to cardholders. Whether your operation is still in the start-up phase or has been established for a few years, a business credit card may expand your financial resources, offer enhanced control over your expenses and even help simplify tax reporting.

Here are a few benefits business credit cards may provide to business owners:

Your business credit score is an essential factor of your company’s financial wellness. Some business credit cards, such as Capital One’s business cards, report accounts to one or more credit bureaus, potentially helping you establish or build your business credit score.

Business cards often have higher spending limits. This is because issuers consider your personal income, business revenue and personal credit standing when determining eligibility. Those high spending limits may also come with additional perks. For example, the Spark 1.5% Cash Select card offers eligible cardholders the opportunity to get a spend bonus within the first three months.

Business credit card rewards and perks are designed to match typical business needs and spending habits. For instance, Capital One’s Spark 2X Miles business card offers unlimited 2X miles on every purchase, a $120 credit toward Global Entry or TSA PreCheck® and unlimited 5X miles on hotels and rental cars booked through Capital One Travel.

Some business credit card issuers, including Capital One, allow you to issue employees their own cards to access the business line of credit. You can often set spending limits or restrict transaction types for each employee card, which will help keep your business finances on track.

At the end of the year, Capital One business cardholders receive a detailed expense report that helps them categorize and track their spending. This is a common feature of business credit cards, designed to help businesses with accounting and tax efforts.

Business credit cards should also help keep your personal and business expenses separate, which makes itemizing those expenses and identifying potential tax deductions simpler at tax time.

Although business credit cards have significant perks, they do have some considerations, including:

• Impact on personal credit: When applying for a business credit card, it’s common for the issuer to make a hard inquiry on your personal credit report when determining eligibility. You may also be asked to provide a personal guarantee, where you’re personally liable for any outstanding debts. Actions like late payments could appear on your personal credit report. Alternatively, other actions, like paying on time, could positively impact your personal credit score.
• Limited consumer protections: Consumer protection laws may not apply to business credit cards. While some issuers may still abide by consumer protection regulations, it’s possible you may encounter higher fees or penalties for late payments than you would with a consumer card.
• Brief introductory periods: Business credit cards may offer valuable introductory or promotional periods but only for a short time, usually no longer than a year from the date the account was opened.
• Annual fees and interest rates: Business credit cards may have high annual fees. However, there are options that don’t come with any annual fees. And sometimes the rewards and perks can help offset the cost of the annual fee. Business credit cards also may have higher interest rates than some consumer cards.
• Risk of overspending or card loss: Having a credit card to keep track of—or several, if you opt into employee cards—often means there’s a risk of the card being misplaced or stolen. Capital One offers security features that allow you to lock missing cards, receive fraud alerts and more. Distributing employee cards may also increase the risk of overspending on the account, but setting limits on the cards can help mitigate that risk.

Here are answers to some frequently asked questions about whether your business should get a credit card.

Not only are business credit cards necessary if you want to charge business expenses on a credit card, they are often beneficial for businesses of any size and any age. 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.