1. Sales & Marketing
  2. Finances
  3. Your Team
  4. Technology
  5. Social Media
  6. Security
Product and service reviews are conducted independently by our editorial team, but we sometimes make money when you click on links. Learn more.
Grow Your Business Finances

Do You Need a Small Business Credit Card?

Do You Need a SMB Credit Card?
Credit: Mooshny/Shutterstock
  • Don't use a small business credit card to finance your business.
  • The responsible use of a small business credit card is a good way to separate personal and business expenses.
  • If you elect to get a small business credit card, try to find a credit card issuer that lets you earn rewards that can directly benefit your business.
  • Only use a small business credit card for business expenses.

When entrepreneurs start businesses, their first thought is often about their product or service. What will they offer to customers? Small business owners often feel the same way. How can they alter their products or services to better serve customers? While there's nothing wrong with a customer-focused approach, many small businesses fail because they fail to look inward, especially financially.

Small business owners need to be aware of their finances and find ways to monitor their cash flow to have success, especially in the first few years of operation. One way to aid in cash flow, and to make filing taxes easier, is to get a small business credit card. There are both pros and cons to getting a small business credit card, and it's important to consider both before reaching a decision.

Editor's note: Looking for a small business loan? Fill out the questionnaire below to have our vendor partners contact you about your needs.

buyerzone widget

Credit card issuers such as Chase, Visa, Discover, MasterCard and the Open network at American Express offer cards tailored to owners of small businesses. Many of these cards come with specific benefits that accrue as users make purchases. Some of the most common benefits are extra cards for employees, airline miles, gas rebates, rewards points and savings on business supplies.

Credit card companies also offer low or nonexistent interest rates on new cards. No-interest credit cards give you a limited-time opportunity to finance your business without paying a penny of interest.

However, missing a payment due date or not paying off the total before the deal ends could result in hefty interest fees – on the whole balance, not just the remainder of what you owe. Be sure to also check if there's an annual fee that may affect your business.

Personal finance author Eric Tyson said that if a small business owner decides to use a business credit card, they should know what they're getting into. [Interested in small business loans and other financing options? Check out our reviews and best picks in loan providers.]

"Be sure to compare different ones and to understand the interest rates and other financing terms they carry," he said.

If one company requires an annual fee but another doesn't, you may opt to use the credit card company that doesn't charge an annual fee. On the other hand, the company with the fee may offer more opportunities to earn rewards points. Some credit card companies may offer small business credit cards with high foreign transaction fees, while others might have different rates on their foreign transaction fees. If you work with a foreign supplier regularly, this may be an important consideration.

Does the credit card issuer offer a business platinum card? Some companies, like Chase, offer benefits like Chase Ultimate Rewards. Capital One offers a line of "Spark business credit cards" that include things like "Spark Cash Back Rewards" and "Spark Miles." Are those offerings, like bonus miles, things that might help your small business? Are there any major differences in transaction fees between the major credit card companies? Are you looking to get employee cards? All of these are questions worth answering when considering the ups and downs of getting a small business credit card.

Tyson doesn't recommend using credit cards to finance a startup, but he said that if you get a business card, it should remain totally separate from your personal credit cards. Mixing personal and business credit purchases makes it difficult to sort through your business expenses at tax time or if you get audited by the IRS.

For personal expenses, use a personal credit card. Keeping business and personal cards separate also allows you to take advantage of quarterly and annual statements provided by your credit card company. These statements break down your expenses into categories and can be very helpful when you're tracking expenses.

It's also important to understand the benefit of a business credit card. The card can help with short-term debts but shouldn't be used for long-term needs like financing a business or making massive purchases that you won't be able to pay off in a few months.

"Even the best credit cards have high interest rates," said Brian Cairns, founder of ProStrategix Consulting. "If you are using them for purchases that you will pay off in one to three months, they are fine. If you are taking on debt that requires you to carry balances for longer, you probably have other business issues. In that case, I would not recommend a credit card, and you would not be likely to get a reputable one."

Two of the most clear-cut pros of using a business credit card are separating personal and business expenses and gaining short-term spending flexibility. These considerations are common reasons small businesses elect to get company credit cards.

"Most small businesses should have at least one small business credit card," said Dave Grossman, founder of YourBestCreditCards.com. "The first, and perhaps most obvious, reason is to keep your personal and business expenses separate. By having one or more cards used exclusively for your business, you'll make it much easier for you or your bookkeeper to reconcile your business spending."

Separating business and personal expenses helps a lot when filing taxes, and getting a business credit card can make the separation process simpler. For small business owners who expect to spend money on their credit cards, getting a business credit card to separate expenses is a smart idea.

Additionally, some credit card companies offer tremendous rewards packages to small businesses that elect to use business credit cards. These benefits might be worth getting a business credit card, especially if you currently use your personal card to make business purchases. Spending money can help you earn bonus points that can be put toward other purchases.

"Most business credit cards offer some kind of cashback rewards or points to their users," said Logan Allec, a CPA and owner of the personal finance site Money Done Right. "If you plan to charge a significant amount each month to your credit card, then these rewards or points can be substantial. When every little bit of money counts for a small business, the ability to make some extra income via cash back or points can play a big role in your business."

Some credit card companies may even offer cash as a reward through cashback programs. Different cards offer different bonus systems; it's important to find the system that best works for your business, and allows you to earn rewards and benefits from using the card. If you can benefit from travel rewards, try finding a card with travel rewards points. If your business would best benefit from receiving cash from a cashback program, take a closer look at companies with those offerings. Finding the right rewards program is an important consideration.

While business credit cards can be a tempting way to keep a company afloat, using them as a regular practice is not advisable. Using them to buy some big-ticket item when money is temporarily tight is one thing, but their misuse can bring a business down. It's never a good idea to use a small business credit card to fund your business. It's safer, especially from the view of potential investors, to fund your business using loans or outside investors.

One way to prevent overextending your business's credit card debt is to commit to using only one card. Using multiple cards, one after the other, to pay all the bills and suppliers is financially risky. Sticking to one maintains a reality check on your credit status and expense tracking.

Using just one business credit card helps you stay on track with your finances. On the other hand, getting employee cards for different employees to use can make sense depending on the size of your team. If you have 50 employees, getting two or three cards to use for different expenses won't cripple your business if you use the cards responsibly and for minor purchases.

It's also important to only use your business credit card for business expenses. This distinction is important legally, ethically and financially.

"A large benefit of a small business is the fact it separates your finances from personal and business," said Allec. "However, carrying a small business credit card with you each day increases the likelihood that you could accidentally intermix your finances by using a corporate card for a personal expense. Not only does this impact your liability, but it can create a huge headache come tax time."

It's important to use your business credit card intelligently. While the card gives you more spending freedom, it's not a license to spend recklessly. You're going to face interest payments and fees. There's a professional and legal obligation not to use your credit card for personal items, and using a business credit card can still affect the credit score of small business owners.

"As with personal credit cards, the main disadvantage to small business credit cards is the potential interest expense if you carry a balance," said Matt Frankel, certified financial planner and personal finance expert at The Ascent. "Also, it's worth mentioning that small business credit cards generally require a personal guarantee – in other words, the account's payment history will be reported on your personal credit report. This can ultimately be a good or bad thing, but it's important to know that your personal credit will be tied to your business's ability to repay its debt."

Not all companies tie the use of your business credit card to your personal credit score, but some do. Using a small business credit card can affect your credit score, and it should be used to help with some purchases but not all. You can also build up your business credit score by using your card responsibly.

It's important that you not use your business credit card as an excuse to make risky purchases. If you won't be able to repay the balance, you could quickly turn a helpful resource into a debilitating object. It's also important to understand that when you earn rewards with the card, it's a good benefit but not a reason to make unnecessary purchases.

Most of the cons associated with using a small business credit card are associated with poor decision-making or failing to account for a fee the credit card company charges. If you decide to get a small business credit card, make sure to research each company's offerings to find what card issuer can best fulfill your business's needs.

If you opt to get a business credit card, be cognizant of the pros and cons of using one. Be aware of annual fees, and research the offerings of top credit card issuers like Chase, Visa and MasterCard. Try to find a credit card that offers rewards and bonus points that make sense for your business. Some companies can benefit from travel rewards, while the chance to earn general ultimate rewards may work for others.

After selecting the right card, use it only when necessary. Don't exceed your credit limit, and make sure you know how the use of the business card affects your personal credit score. Don't use a business credit card to fund your business.

There are plenty of benefits to using a business credit card, such as the separation of personal and business expenses and the generous rewards programs. The perks of using a business credit card are only realized, however, if you use your card wisely.

Do you need a small business credit card? That answer isn't always clear, and it depends on your business. For the most part, though, a business credit card can benefit your small business if you make responsible purchases, stay aware of fees and use reliable credit card issuers.

Additional reporting by Chad Brooks and Adam C. Uzialko. Some source interviews were conducted for a previous version of this article.

Bennett Conlin

Bennett is an editorial assistant based in New York City. He graduated from James Madison University in 2018 with a degree in business management. During his time in Harrisonburg he worked extensively with The Breeze, JMU’s student-run newspaper. Bennett also worked at the Shenandoah Valley SBDC, where he helped small businesses with a variety of needs ranging from social media marketing to business plan writing. Contact him through email or Twitter.