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Owning a business is rewarding, but it comes with its fair share of financial challenges. Juggling business expenses, keeping track of receipts, and maintaining a smooth cash flow can be overwhelming for entrepreneurs. This is precisely where a business credit card can come in handy.

Business credit cards can be a great asset for small business owners who need quick financing. By using them, you can boost your company's buying power while building up your business credit. Knowing how to use business credit cards properly is an important factor in taking full advantage of them and steering clear of any issues.

In this article, we’ll get into how business credit cards work and what you need to know to use them responsibly.

How a business credit card works

A business credit card functions much like a personal credit card. The primary difference is that a business credit card is designed for business purchases. You'll find options for every type of business owner, including business credit cards for LLCs, partnerships, startups, and corporations.

Here's a quick breakdown of how a business credit card works:​

How to qualify for a business credit card

When you apply for a business credit card, your personal credit score is usually taken into account. The minimum credit score to qualify for a business credit card starts at around 600. For the best rates, terms, and benefits, it’s best to have a credit score of at least 700. Anything less than 600 will only get you a secured business credit card, requiring you to fund all or part of the approved credit limit.

Qualifying for a business credit card also involves factors beyond personal credit. While a good credit score is helpful, some lenders consider other factors like business revenue, years in operation, and the amount of money you have in the bank. Building business credit through vendor financing or responsible use of other business credit lines can also be beneficial when applying for a credit card.

The documentation you’ll have to provide depends on the credit card issuer and your desired credit limit. Prepare to present documents such as your tax returns, bank statements, business licenses, and financial projections.

How to use a business credit card

You can use a business credit card for all of your business expenses, such as inventory, travel, software subscriptions, advertising, and employee payroll.

When choosing a card, consider your spending patterns to maximize available rewards and perks. Options might include travel points, cash back, bonus miles, or discounts on specific categories like office supplies or shipping.

Many cards offer built-in business expense tracking tools or integrate with popular accounting software. These expense management features help simplify your bookkeeping and tax preparation. In addition, some cards offer authorized employee cards, allowing for controlled spending and expense tracking.

How card payments and interest work

When you carry a balance on your business credit card, you must make at least a minimum payment every month. Always strive to pay the full statement balance to avoid interest charges, which can be significantly higher than personal credit card rates.

Pay close attention to grace periods, typically 21 days, to avoid interest on business purchases made within the billing cycle. Setting up automatic payments is a good way to guarantee ti​m​ely payments and avoid costly late fees.

Tax implications of a business credit card

Properly documented business expenses on your business credit card are tax-deductible. Be sure to keep an accurate log of all company expenses, including receipts and invoices, to guarantee accurate tax filing and deal with any potential audits.

Consider keeping separate accounts and using a dedicated business bank account for card payments to streamline bookkeeping and tax preparation. As always, consult with a tax professional for specific guidance.​

Benefits and disadvantages of business credit cards

Business credit cards are a great way to separate your business finances, earn rewards on your purchases, and build business credit. Despite this, there are both advantages and disadvantages to be considered.

The benefits of using a business credit card include:

  • Reward programs: Eligible spending can provide ways to earn cash back, travel points, and other rewards you can redeem for business travel, equipment, or even employee rewards.
  • Building business credit: Responsible card usage helps establish a positive business credit history, which is key to securing loans, better interest rates, and higher credit limits​​.
  • Improved cash flow: Paying for large purchases over time allows for better financial planning without impacting your immediate cash flow.
  • Simplified business expense tracking: As long as you strictly use your business credit card for business expenses, your card statements will provide a clear overview of your business spending, facilitating bookkeeping and tax preparation.
  • Fraud protection: Many cards offer built-in fraud protection, safeguarding your business from unauthorized transactions.

Some disadvantages of using a business credit card include:

  • Annual fees: Some cards carry annual fees, so consider whether the rewards and benefits outweigh the cost.
  • High interest rates: Carrying a balance or incurring late fees can lead to higher interest rate charges, significantly increasing costs.​
  • Temptations to overspend: Easy access to credit can lead to overspending, so responsible budgeting is crucial.
  • Potential impact on personal credit: Some business cards link to personal credit, so mismanagement can hurt both personal and business​​ credit scores.

Corporate credit cards are an alternative to traditional credit cards that offer additional benefits, such as higher spending limits, expense tracking tools, and employee card management for larger businesses. They're the only type of card that uses an EIN (employee identification number) instead of your personal credit report to determine creditworthiness. However, you’ll have to meet certain revenue requirements to qualify.

Can I pay my business credit card using my personal account?

Technically, yes. You can use a personal account to pay your business credit card bill. The downside is it blurs the lines between personal and business finances, making it hard to track business expenses, and can impact your taxes.

In addition, commingling accounts puts your personal assets at risk. When you do this, you’ll become liable if your company incurs business debt and any legal issues. ​For these reasons, it’s best to maintain a clear separation of your finances.

What you can use a business credit card for

You can use your business credit card for any business-related expenses. These include:

  • Office supplies
  • Software subscriptions
  • Travel expenses
  • Marketing and advertising costs
  • Vendor payments
  • Utility bills
  • Professional services fees (such as legal, consulting, or accounting services)
  • Employee training and development programs
  • Networking event fees and memberships
  • Business insurance premiums
  • Equipment purchases (like computers, machinery, or office furniture)
  • Inventory or stock purchases
  • Website hosting and domain fees
  • Trade show and conference fees
  • Business-related meals and entertainment
  • Postage and shipping costs
  • Office renovation or repair expenses
  • Technology upgrades (like new software or hardware)

What you shouldn't use a business credit card for

While you can use your card for a wide range of business-related expenses, there are several categories you should avoid. These include:

  1. Personal expenses: Using a business credit card for personal expenses can blur the lines between your personal and business finances, leading to tax complications and possible violations of your cardholder agreement.
  2. Costly cash advances: Cash advances on a business credit card typically incur high fees and interest rates, making them an expensive and unfavorable borrowing option.
  3. Gambling or illegal activities: Using a business credit card for gambling or illegal activities can severely damage your business's reputation and legal standing.
  4. Gifts or donations: These may not qualify as business expenses and can be scrutinized during audits, making them unsuitable for a business credit card.

7 mistakes to avoid when using a business credit card

1. Mixing personal and business expenses

One of the cardinal rules of using a business credit card is to avoid mixing personal and business expenses. This practice can lead to complex tax issues, potential violations of your credit card terms, and difficulties in tracking your business finances. Always use separate cards for personal and business purposes to maintain clear financial records and uphold the integrity of your business's financial management.

2. Failing to pay balances in full and on time

If you don't pay on time or maintain a balance, you can rapidly rack up significant interest rates and fees, which can be detrimental to the financial stability of your business. Making payments in a timely manner is a must if you want to keep a good credit score, which is essential for taking out loans or getting additional credit in the future. Make it a habit to pay off your balance in full each month to avoid these unnecessary costs.

3. Ignoring credit utilization ratios

High credit utilization—using a large portion of your available credit limit—can negatively impact your credit score. It’s best to keep your credit utilization below 30% of your limit. Consistently maxing out your credit card signals to lenders that you may be a high-risk borrower, which can lead to reduced credit limits or declined applications should you seek a business loan or line of credit.

4. Choosing unhelpful rewards and perks

Business credit cards offer rewards and perks that can be highly beneficial for your business. However, many cards only offer rewards in certain spending categories, or offer extra rewards on purchases like travel and dining. Instead of choosing a card that encourages spending, you might want to consider choosing a card that offers universal cash back on all purchases. That way, you won’t be incentivized to spend more for the points.

5. Not setting employee usage policies

If you provide employees with company credit cards, failing to set clear usage policies can lead to unauthorized or non-compliant spending. Establish clear guidelines with your employees and choose a credit card that lets you enforce your expense policy automatically to maintain control over your business expenses.

6. Neglecting to track your account regularly

Regularly reviewing your credit card statement is crucial for spotting any unauthorized transactions or errors. This habit also helps in keeping track of spending, making sure that you remain within budget, and aids in early detection of fraudulent activities. Frequent monitoring also reinforces better spending habits and financial discipline within your business.

7. Underestimating the impact on personal credit

While a business credit card is for your company, in many cases, it’s still linked to your personal credit. Mismanagement of your business credit card, like late payments or high credit utilization, can negatively impact your personal credit score. Be mindful of this connection and manage your business credit card with the same caution as your personal finances to protect both your business and personal credit health.

Level up your business credit with Ramp

At Ramp, we understand the importance of building business credit and managing expenses. That's why we designed an all-in-one corporate card and expense management platform. Any US-based registered business with at least $75,000 in a business bank account is eligible, and we have no spending requirements.

Our corporate card is powered by an intuitive platform featuring business expense management software. In addition to helping you keep track of your spending, we also help your business save an average of 5%. That's because you'll spend less time and money on keeping up with various aspects of your business, so you can devote resources to more critical tasks.

Consider Ramp’s corporate card to manage your finances effectively and save more for your business

Try Ramp for free.
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Finance Writer and Editor, Ramp
Ali Mercieca is a Finance Writer and Content Editor at Ramp. Prior to Ramp, she worked with Robinhood on the editorial strategy for their financial literacy articles and with Nearside, an online banking platform, overseeing their banking and finance blog. Ali holds a B.A. in Psychology and Philosophy from York University and can be found writing about editorial content strategy and SEO on her Substack.
Ramp is dedicated to helping businesses of all sizes make informed decisions. We adhere to strict editorial guidelines to ensure that our content meets and maintains our high standards.


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