Business credit cards are financial tools designed specifically for business expenses, allowing companies—large or small—to separate their personal and professional finances, manage cash flow, and potentially earn rewards. Here’s a clear breakdown of how business credit cards work:
What is a Business Credit Card?
A business credit card functions much like a personal credit card but is issued to a business rather than an individual. It allows a business to borrow money up to a certain limit to cover short-term expenses such as supplies, travel, and other operating costs.
Who Can Get a Business Credit Card?
You don’t need to own a large company to qualify. You can apply if you’re:
-
A freelancer or sole proprietor
-
Running a side hustle (e.g., Etsy, Uber, consulting)
-
Managing a small to medium-sized business
-
A corporation or LLC
When applying, you’ll often need to provide:
-
Your business name and structure
-
Estimated revenue
-
Federal Tax ID (EIN) or your SSN (for sole proprietors)
How Does It Work?
1. Application & Credit Check
Most issuers will run a personal credit check—even if the card is for your business. This means your personal credit score could impact approval and terms.
2. Spending & Repayment
Once approved, you’ll receive a credit limit. You can:
-
Use the card for business-related purchases
-
Pay off the balance in full each month or carry a balance (with interest)
3. Interest & Fees
-
APR applies to carried balances
-
Annual fees vary by card
-
Some offer 0% intro APR for a limited time
4. Rewards & Perks
Many cards offer:
-
Cash back or points on purchases
-
Travel perks, like airline miles or hotel points
-
Expense tracking and integrations with accounting software
5. Employee Cards
You can issue cards to employees with custom spending limits, and all expenses are billed to the main account.
Benefits
-
Separate personal and business expenses
-
Build business credit (important for future loans)
-
Earn rewards on business spending
-
Better bookkeeping with itemized monthly statements
-
Improved cash flow through payment flexibility
Risks & Considerations
-
Personal liability: Many cards require a personal guarantee, meaning you're personally responsible for the debt.
-
Overspending: Easy access to credit can lead to overspending or debt.
-
Impact on personal credit: Missed payments can hurt your personal score, especially if the card reports to personal credit bureaus.