How to get a business credit card
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Credit cards are nothing new. Most adult Americans have one in their wallets. Because personal credit cards are so popular, it’s not surprising to find that small business owners often look to business credit cards for a variety of reasons.
There’s almost a sense of accomplishment when you see your business name on a credit card. Although it may be somewhat exciting, it’s important to remember that credit cards are financial tools. And just like any other tool, they can be dangerous when not properly used. So, if you decide to figure out how to get a business credit card, you’re committing to being responsible about how you use it.
Why get a business credit card?
There are several reasons you might want to learn how to get a business credit card, regardless of the type of business you have. These credit accounts can help you build your business's credit while allowing you to access the money you need when you need it.
You can also use rewards programs and business credit cards to pay off high-interest debts with 0% intro APR promotions for the first calendar year or longer. Below, we’ve included a breakdown of the most significant benefits of business credit cards.
Build business credit
As a consumer, you’ve worked hard to build an excellent credit score. On the other hand, if you’re like most startups, your business doesn’t have any credit history at all. As with personal credit, if you want to build business credit, you’ll need to show strong payment history.
That’s impossible to do without some type of loan, and revolving loans like credit cards are known for doing the trick quickly.
The best small business credit card providers report to all major credit bureaus. As you use your card responsibly, you improve your business credit score. This can help you increase your business credit card limit or even get loans your business didn’t qualify for in the past.
Get access to the money you need
Whether you’re as sole proprietor or fledgling small business, one of the biggest challenges for new businesses is business financing. Early-stage businesses often spend all of their cash flow fulfilling developing products, marketing, and fulfilling orders. Unfortunately, that leaves most companies cash-strapped, which can pose significant issues like:
- An inability to fill purchase orders. If you get a large purchase order, you may not have the necessary money to fulfill it.
- A lack of office supplies. You need office supplies to keep your business afloat, but this can also become a major expense for cash-strapped businesses.
- Travel. As a new business owner, you likely travel quite a bit. You may be meeting manufacturers, selling your product at trade shows, or negotiating with investors, all of which cost money you may not have.
The good news is that business credit cards typically have higher credit limits than their personal counterparts. A meaningful line of credit can help you get through the growing pains your business will likely experience.
Track and manage business expenses
A wise business owner pays close attention to every dollar that comes into and leaves their business. However, expense tracking can quickly become a full-time job if you use a mix of cash and multiple business spending accounts for your business.
On the other hand, you could use your business credit card for purchases and use your cash to pay off the card regularly. In doing so, your credit card becomes a ledger of every expense your business pays, making expense tracking and management a more straightforward process. Some options, like Ramp, even have built-in expense tracking and analytics to streamline the expense management process.
Benefit from rewards programs
Chances are, you have a rewards credit card in your pocket, but did you know rewards credit cards aren’t just for personal use? Many business accounts also come with credit card rewards, among other perks after account opening.
In most cases, these rewards will fall into one of two categories:
- Cashback rewards. You earn a set percentage of your purchase total back in cashback rewards every time you use your credit card.
- Travel rewards. You earn travel rewards points or bonus miles every time you use your credit card. You can save these bonus points and use them to pay for travel accommodations.
Although these are the two most popular rewards credit card options, they’re not the only ones. Other programs may offer gift cards, statement credits, etc.
Also, make sure to read the fine print. While most reward programs apply to every dollar you spend, some will only apply to “eligible purchases,” and there may be a cap on the number of rewards you can earn.
Pay off other high-interest credit cards
It’s normal for a small business to have debts. In some cases, the interest on those debts can be exorbitantly high. A business credit card may help you reduce expenses by lowering the interest you pay on these accounts.
Several credit card companies offer balance transfer credit cards with 0% intro annual percentage rates (APRs) for a year or longer. You can use these cards to pay off high-interest debt and make a plan to aggressively pay down the balance during the 0% introductory APR promotional period. You don’t want to overdo it, though. If you don’t pay the balance off in the promotional period, any remaining debt will be charged at the standard interest rate for the card.
How to open a business credit card in 6 easy steps
Chances are you’ve applied for a credit card in the past. You simply pick the card you want, give the lender your name, birthday, social security number, address, and income information, and the lender makes their decision.
However, businesses come with more risk. If your business closes its doors, the lender may not be able to collect the debts your business owes. So, the application process is a bit more involved for a business credit card than a personal one. Below, you'll find the answer to the question, "How to open a business credit card."
Step #1: Assess your needs
Before you start comparing your options, it’s essential to consider your business needs. After all, your business is unique, with its own specific requirements. Some things you should think about include:
- Credit limit. Are you using a credit card to fund purchase orders that cost you over $10,000? If so, you’ll want to apply for a card with high credit limits.
- Employee cards. Are you the only person who will use the credit card, or do you let some of your employees spend on your account? If you need multiple authorized users, your credit card company must support this option.
- Intentions. How do you intend to use your credit card? If you plan on using it for balance transfers, you’ll likely need a different type of credit card than if you plan on using it for day-to-day expenses.
Step #2: Do your research
There are several different offers from several different credit card issuers to choose from. Do your research to find lenders that share your values.
Moreover, it’s important to use your credit card responsibly, which can be difficult for small business owners. Do some research to learn how to use your account correctly so that you don’t find yourself drowning in debt.
Step #3: Consider your eligibility and creditworthiness
Business credit card requirements are typically more strict for business credit cards than personal ones. Your business needs to generate meaningful, regular revenue, and it’s good to have a solid business credit score.
If your business has no credit history, some lenders will make their decisions based on your personal credit history, so long as you’re willing to make a personal guarantee to pay the debt off. Of course, you’ll need a solid personal credit score to take advantage of this option.
Step #4: Gather the information you need to apply
Business credit card applications typically require quite a bit of information. Credit card companies will usually ask for your business name, employer identification number or tax ID, business address, proof of annual business revenue, and even the number of employees. It’s important to have this information handy when you apply to streamline the process, so gather it in advance.
Step #5: Choose the right credit card
As mentioned above, there are many business credit card offers to choose from. Each offer comes with a different rewards structure, fee structure, credit line, and perks. Different types of organizations will have different needs or requirements. For example, a small nonprofit looking for a credit card has different needs than an enterprise company.
Here’s what you should pay attention to as you compare:
- Annual fees. Some business credit card annual fees are exorbitantly high. On the other hand, some come with no annual fee at all.
- Interest rates. Interest is usually the highest cost aspect of a credit card; the lower your rate, the better.
- Foreign transaction fees. If business travel is a norm for you, look for a credit card that doesn’t charge foreign transaction fees.
- Rewards. Consider the rewards you’ll use the most. For example, travel rewards could help reduce your business’s travel expenses.
- Capabilities. Some business accounts have special capabilities, such as improved expense management and the ability to give cards to your employees. Think of the features you need as you compare your options.
Step #6: Applying for a business credit card
Now that you’ve completed your paperwork and chosen the card you want, it’s time to fill out the application. As you do, make sure to answer every question as accurately as possible. Inaccurate answers could result in your application being declined.
Best practices for getting a business card
Finding the credit card you want for your business is one thing; getting approved is another. These cards are usually more challenging to get your hands on than personal credit cards, but there are some things you can do to improve your odds.
Follow the 4 best practices below for your best chances of getting approved for a business credit card.
1. Optimizing personal and business credit scores
There are several things you can do to improve your credit score. For example, you can pay more than the minimum payment on your monthly debts, keep your balances low, and take care not to have too many hard inquiries on your credit report.
Start by pulling your personal and business credit reports to see where you stand. Next, consider what you can do to improve your credit and increase your chances of approval.
Also, check your personal and business credit reports for inaccuracies, as these could also lead to declines.
Additionally, avoid using a personal credit card for business expenses. This will protect your personal finances and credit score from being affected by business activities.
2. Avoiding maxing out credit lines
When you max out your credit lines, you show lenders that you need more revolving credit. That’s not a good sign, so doing so can negatively affect your credit score and your ability to get new loans in the future.
A general rule of thumb is to keep your balances below one-third of your credit line. So, if you have a $3,000 credit line on a credit card, you should never have more than a $1,000 balance on it.
3. Maintaining financial records
The credit card company you choose will likely require you to provide financial records to prove your business revenues and your personal income. If you cannot, there’s a good chance the lender will decline your application.
You can avoid this headache altogether by maintaining your financial records. Keep a running tally of your income, both business and personal, as well as your expenses. This tip is about effective accounting, which can help you get a credit card and improve your business’s financial position.
4. Following good business practices
Following sound business practices may not seem like it will help you get approved for a credit card, but that’s a false notion. Good business practices include sound financial practices, which can lead to credit card approvals.
For example, the following will help you get approved:
- Solid record keeping. Keeping solid financial records is helpful for any business and simplifies the credit card application process.
- Increasing revenues. Good business practices typically lead to increasing revenues, which lenders like to see.
- Increasing earnings. As with revenues, lenders like to see growth in your bottom line. Following good business practices can help you demonstrate this.
Getting a business charge card with Ramp
If you’re looking to figure out how to open a business charge card, Ramp is a great place to start. Ramp uses your sales to determine credit eligibility, which can lead to higher credit limits on average.
There are other card benefits too:
- Unlimited purchase cards for unlimited cardholders
- Unlimited virtual credit cards
- Detailed expense tracking and analytics
- Quality accounting tools
- No foreign transaction fees
- Automated financial management that scales with your business
The bottom line is that Ramp offers one of the best corporate cards on the market today.
Charge and credit cards may seem similar initially, but when you dig into the details, you’ll realize they’re two very different offerings because of one core concept. The critical difference in the charge card vs. credit card comparison is when you have to pay the debt off.
You must pay the debt in full each billing cycle when you have a charge card. So, if you spend $1,000 on the card this month, your minimum payment for this month will be $1,000 plus any applicable fees.
A credit card allows you to spread your payments out over time. You can pay these accounts back with small monthly payments, but remember that the longer it takes to pay off the debt, the more it will cost you.
Secured and unsecured credit cards are very similar. You can use both for business purchases and pay them back slowly. However, there are a few key differences in the unsecured vs. secured credit card comparison:
- Security deposit. Secured credit cards require a security deposit. Unsecured credit cards do not.
- Fees. Secured credit cards typically come with higher fees than unsecured credit cards.
- Rewards. Unlike most unsecured cards, secure credit cards don’t usually offer rewards programs.
If your business doesn’t qualify for an unsecured credit card, consider a prepaid credit card for business instead.
The best business credit card for one business may not be the best for the business next door. Every business is unique and has unique financial needs, financial capabilities, and credit histories. So, the only way to determine the best business credit card for you is to compare your options and consider how each option relates to what you need in a credit card account.
Some of the most popular offerings to compare include:
- Ramp. Get access to a credit line with sales-based underwriting and improve your chances of approval.
- Capital One Spark Cash Plus. Earn between 2% and 5% cashback.
- American Express Blue Business Cash. Earn between 1% and 2% cashback plus a $250 sign-up bonus.
- Chase Ink Business Cash. Earn between 1% and 5% cashback plus a $900 sign-up bonus.
- Bank of America Business Advantage Travel Rewards Mastercard. Earn between one and three points per dollar you spend. Redeem your points for travel rewards.