Many business credit cards offer rewards and benefits that are as great as – and sometimes better than – those of the best personal credit cards.
Business cards often have huge sign-up bonuses, include unique category spending bonuses, and offer several other benefits.
However, some people are hesitant to apply for a business credit card, even if they qualify. You don’t need to have a formal brick-and-mortar business to be approved for a business card.
Whether you’re a freelancer or someone starting a new side job, there are plenty of good reasons to add a business credit card to your wallet. Here are some of the most attractive.
You don’t need a big company to get a business card
This seems to trip up a lot of people who think you need to be incorporated with its own tax ID number or employee identification number to apply for a business credit card.
That’s just not the case. You may even qualify for a business credit card without even knowing it. While you should aim to use your business credit card for work-related expenses, each credit card company has a different threshold for the information someone needs to get a small business card.
Some, like American Express, are very flexible. Chase is generally the most difficult and often requires proof of your business, including your government employer identification number (EIN) and business checking account information.
However, many small businesses start out with simple DBAs (doing business as), which designates a business name used by a person or entity that is different from the person or entity’s real name.
So if you’re starting a small eBay business and want to keep these finances separate from your personal expenses, you may want to consider a small business credit card to help you do that.
Daily newsletter
Reward your inbox with the TPG Daily newsletter
Join over 700,000 readers for the latest news, in-depth guides and exclusive offers from the experts at TPG
If you’re starting a small business as a sole proprietorship, you can provide your Social Security number when asked for an EIN, which is usually sufficient. In most cases, you don’t need any paperwork to form a sole proprietorship; you become one simply by doing business.
Related: What name should I put on my business credit card application?
Business credit cards are not on your personal report
Business credit card applicants typically experience a two- to five-point hit to their personal credit score when applying for a business credit card, as banks typically use your personal credit report to assess your creditworthiness. That’s because these cards are usually still personally guaranteed.
However, other than this initial credit inquiry, the business credit limit is separate from your personal credit limit, so your utilization ratio and other factors should not affect your personal credit score.
That’s good news if you handle large amounts of money through your business cards, as it won’t hurt your personal credit score. Be careful because if you default on a business credit card, the issuer could come after your personal assets since your personal credit guarantees these cards.
The other bonus is that you can apply for a calling card from most issuers without affecting your 5/24 status with Chase, since the new account won’t appear on your personal credit report.
Keep costs separate
For your convenience, you can easily charge all your expenses, both personal and business, to the same credit card.
Still, it’s important to keep your personal expenses separate from your business expenses, especially during tax season. Having a separate business credit card makes it easy to keep track of expenses, and you’ll pay less in accounting fees if your accountant doesn’t have to sort out personal and business expenses (plus, it’s easier to get everything in order if you’re ever audited by theirs).
As a bonus, many business credit cards make it easy to export your transaction history to QuickBooks or other accounting software.
Related: Should You Pay Your Taxes With a Credit Card?
Double dip on welcome bonuses
By applying for business credit cards, you can opt for a whole new range of welcome offers.
For example, you may have already scored the welcome bonuses on the Chase Sapphire Preferred® Card or the Chase Sapphire Reserve®. To continue accumulating Ultimate Rewards points, consider the Ink Business Preferred® Credit Card, which offers 100,000 bonus points after you spend $8,000 on purchases in the first three months of account opening.
A good place to start is to look at the cards you currently carry and see if any of them have business counterparts that could be good options for your budget and spending habits.
Maximize different categories for earning bonuses
While you’ll find many business cards with bonus categories for travel or dining that overlap with personal credit cards, you’ll also find many unique categories that are clearly aimed at businesses, not consumers.
Take the American Express® Business Gold Card — with an annual fee of $375 (see rates and fees) — which gives you 4 points per dollar in the two categories you spend the most each month from the following list, on the first $150,000 in combined purchases per calendar year (then 1 point per dollar thereafter):
- Purchases from US media providers for advertising in selected media (online, TV, radio)
- US purchases from electronic goods retailers and software and cloud systems providers
- US restaurant purchases, including takeout and delivery
- American purchases at gas stations
- Transit purchases, including trains, taxis, rideshare services, ferries, tolls, parking, buses and subways
- Monthly wireless service charges charged directly to a US wireless service provider
There’s also the Ink Business Preferred Card, which earns 3 points per dollar on your first $150,000 in combined purchases per account anniversary (1 point per dollar thereafter) in the following categories:
- Travel, including airline tickets, hotels, rental cars, train tickets and taxis
- Shipping purchases
- Internet, cable and telephone services
- Advertising purchases made through social media sites and search engines
Many of these categories do not overlap with those of personal cards, making business cards ideal for maximizing your revenue.
Business benefits
Entrepreneurs often have different needs than consumers. Many issuers offer some form of transaction or expense management on business credit cards to help you stay organized, and some even offer free employee cards, which can help you earn rewards even faster.
You’ll also find several cards with great purchase protection and extended warranties, as well as cell phone protection, so your business isn’t financially responsible if you buy expensive products that get lost or damaged.
More cards
While many banks decide how many credit cards you can have based on your total credit limit, some banks also simply limit the number of cards you can have open. For example, you can typically only have five credit cards with Amex at a time.
The limit for cards like The Business Platinum Card® from American Express is segregated, meaning you can increase your business’s purchasing power and get some great introductory offers at the same time.
Establish a business credit history
This goes hand in hand with the fact that your business credit card line of credit does not appear on your personal report.
While you hopefully have a high personal FICO score when you initially apply for a business card, once that card is open the entire record is separate from your personal credit.
However, if your business takes off and you eventually apply for financing (for equipment purchases, real estate, or other major expenses), banks will look at your business’ credit history when determining your interest rate, and the better your credit line is built up, the better rates you are likely to get.
Related: 10 Considerations for Your Small Business Credit Card Strategy
More purchasing power
Business credit cards often have higher credit limits than personal credit cards, and that’s where small businesses get off the ground. Keep in mind that some business cards require the balance to be paid off in full each month or you may incur high fees, which will likely wipe out the value of the points or miles you accumulate.
In short
Although your business may still be in its infancy, you may not think you need a separate credit card for business-related expenses. It’s important to remember that there are many benefits to using the right credit card for your small business. Business credit cards can provide your business with important benefits, including rewards you can use for travel, perks like expense management, and credits to help you grow.
For rates and fees of the Amex Business Platinum, click here.
For Amex Business Gold rates and fees, click here.
