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Entrepreneurs starting a new business, managing their own startup, or working as a freelancer may not find it particularly helpful to use a personal credit card for business expenses like office supplies.

Mingling personal and business expenses without a business credit card can lead to a complex intertwining of your finances. The mixing of accounts can sometimes make it hard to separate and organize expenses, which is key for any small business to stay successful. This can cause confusion, compliance worries, and difficulty when filing taxes.

In this article, we’ll discuss the benefits and drawbacks of using a business credit card, and what you should know before deciding to use one for your business.

The benefits of a business credit card

A business credit card offers plenty of benefits, including:

  • Clear separation of finances: Small business credit cards let you separate your personal and business purchases, simplifying your accounting and tax filing. They also safeguard your personal credit score by keeping it separate from your business finances.
  • Better cash flow management: Your business credit card acts as a flexible source of financing to cover business expenses when cash reserves are low. It also helps manage cash flow fluctuations and allows you to seize unexpected opportunities without having to spend time applying for a small business loan.
  • Rewards and perks: The best business credit cards offer rewards like cashback, business travel rewards, or business discounts. Accumulating reward points on eligible purchases, especially large purchases, can save you a significant amount of money.
  • Building business credit: A business credit card establishes and builds your business credit history, which is vital for accessing larger lines of credit and favorable loan terms. A strong credit profile enhances your ability to negotiate with suppliers and secure financing.
  • Simplified expense tracking: Business credit cards provide detailed monthly statements with categorized spending summaries. They also offer integration with accounting software for streamlined expense tracking and reporting. These features reduce administrative burdens, allowing you to focus on strategic decision-making.
  • Enhanced financial organization: Having a business credit card facilitates organized record-keeping of business expenses, making it easier to monitor financial health. This ensures transparency and accountability in financial management.
  • Increased purchase power: A business credit card expands your purchasing capabilities beyond the limits of available cash. It also allows for larger transactions and investments that can drive business growth.
  • Emergency funding source: A business credit card serves as a valuable backup fund in case of unexpected financial emergencies or urgent business needs. It also provides peace of mind knowing you have a financial safety net.
  • Vendor and supplier benefits: Some business credit cards offer early payment discounts or incentives, fostering better relationships with suppliers. They may provide extended payment terms, optimizing your working capital.
  • Employee expense management: Business credit cards include the option of issuing supplementary cards to employees, streamlining expense management and tracking. You can set spending limits and controls for employee cards, enhancing financial oversight.

What you should know before you get a business credit card

Selecting the right business credit card is a critical decision that impacts your company's financial health.

Some key aspects to consider are:

  • The interest rate: It's essential to differentiate between the introductory APR and the regular APR. Some cards offer a low introductory rate that can be very attractive initially but may significantly increase after the introductory period. Consider how long the introductory period lasts and what the rate will be afterward, especially if you plan to carry a balance.
  • Annual fees: Annual fees can vary widely among business credit cards. High fees are often associated with cards that offer more rewards and benefits. Evaluate whether the benefits provided by the rewards card (like airport lounge access, free additional cards for employees, higher rewards rates) outweigh the cost of the annual fee. For some businesses, a no-annual-fee card might make more sense, especially if the card is used infrequently.
  • Late payment fees and penalties: Understanding the consequences of late payments is critical. Late payment fees can be hefty, and some cards may increase your APR to a penalty rate if you miss payments. This can significantly increase the cost of any carried balance. Knowing these details helps in setting up effective payment reminders and budget planning to avoid such penalties.
  • Rewards and benefits: Business credit cards often come with rewards programs, such as cash back, points for travel, or discounts on business purchases. Assess these rewards carefully to ensure they align with your business's spending habits. A card that offers travel points is beneficial if your business requires frequent travel, but if you spend more on office supplies, a card offering cash back on these purchases might be more advantageous.
  • Expense management: Many business credit cards offer features to help manage expenses, such as the ability to issue cards to employees with specific spending limits, integration with accounting software, and detailed spending reports. These features can help streamline expense tracking and simplify financial reporting and budgeting.
  • Security and fraud protection: Investigate the security features and fraud protection offered by the card. This can include zero liability policies for unauthorized transactions and the ability to lock or unlock the card from a mobile app. Strong security features are vital to protect your business from financial fraud and misuse.
  • Liability structure: Be clear on whether the card offers individual or joint liability. Individual liability means you are personally responsible for the debt, while joint liability involves your company sharing responsibility. This affects both the legal and financial aspects of how debt is managed.

How to qualify for a business credit card

The process of applying for a business credit card varies based on your business's structure, be it a Limited Liability Company (LLC), a sole proprietorship, or another kind of business entity.

  • LLC: Credit card issuers typically demand specific documentation: the LLC's registered name, its unique Employer Identification Number (EIN), and detailed financial records. This approach aims to illustrate the LLC's financial solvency independently from your personal credit profile. It's a critical step that underscores the LLC's ability to manage credit responsibly, using its own financial history and credentials as the basis for evaluation, thereby delineating the financial identity of the business from that of its owners.
  • Sole proprietors: Sole proprietors or freelancers may qualify based on personal credit scores and personal finance history, as they often don't have separate business credit scores. For a credit card application, they typically need to start with their social security number.
  • Partnership: Partners must provide the partnership's legal name and tax identification number, typically the Employer Identification Number (EIN), which serves as the business's unique identity for credit purposes. Additionally, financial documentation reflecting the partnership's income and expenses is crucial to establish its creditworthiness. Each partner’s personal credit report may also be considered, especially in smaller partnerships, to assess the overall credit risk. It's important for partners to agree on who will be responsible for managing the card and how it will be used within the business, ensuring a unified front when presenting their case to potential lenders.
  • Trust: Trustees must furnish the trust’s formal designation along with its distinct tax identification, often an Employer Identification Number (EIN), establishing the trust's separate financial entity. Essential to this process is the submission of detailed financial statements or documents that reflect the trust's assets, revenue streams, and expenditure patterns, painting a picture of its fiscal health.

Regardless of the structure, preparing detailed financial records and understanding your credit standing, both personally and for your business, are key steps in qualifying for a business credit card. This preparation not only streamlines the application process but also positions your business favorably in the eyes of potential lenders.

What are the disadvantages of a business credit card?

The potential downsides of business credit card include:

  • Interest costs: Business credit cards often come with higher interest rates than traditional loans, and carrying a balance can lead to significant interest charges.
  • Annual fees: Many business credit cards have annual fees, adding to your operating expenses.
  • Credit score impact: Late payments or maxing out your credit limit can harm your personal and business credit scores.
  • Risk of personal liability: If you're a sole proprietor or personally guarantee the card, your personal assets may be at risk for business debts.
  • Temptation to overspend: The convenience of a credit card can lead to overspending, potentially impacting your budget.
  • Complex rewards programs: Some cashback rewards programs can be complex to navigate and may not always provide substantial benefits.
  • Potential for debt accumulation: Without discipline, a business credit card can accumulate debt, affecting your financial health.
  • The conditions on sign-up bonuses: Attractive introductory offers may have limitations or expire after a short period.
  • Foreign transaction fees: If your business involves international expenses, be aware of foreign transaction fees that can add up.
  • Vendor acceptance: Not all vendors or suppliers may accept credit cards, limiting your payment options.
  • Misuse by cardholders: If you issue cards to employees, there's a risk of misuse, necessitating strict monitoring.

In contrast, corporate cards, like those offered by Ramp, present certain benefits over traditional business credit cards. They typically require payment in full each month, eliminating interest charges. Despite this, they still contribute to building business credit, as companies like Ramp report to credit bureaus.

This setup encourages disciplined spending and better cash flow management, making corporate cards a viable option for businesses looking to avoid the pitfalls of conventional business credit cards while still enjoying the benefits of credit building and easy expense tracking.

Get a Ramp corporate card

Ramp's corporate card option revolutionizes expense management, offering an all-in-one solution that significantly simplifies financial operations for business owners.

Key advantages include:

  • Centralized expense management: Get comprehensive visibility over all spending activities, from paying invoices to handling reimbursements on an intuitive platform. Ramp's emphasis on automation is a game-changer, eliminating the need for traditional expense reports through automated receipt collection and mobile receipt capture. This streamlines processes significantly, freeing up valuable time for small business owners and their staff.
  • Strict spending limits: The card extends its utility by allowing businesses to set and maintain strict spending limits on both physical and virtual cards, fostering responsible spending within budgetary constraints.
  • Savings: Users save an average of 5% through these built-in expense management controls. The flexibility extends further with the issuance of an unlimited number of virtual and physical cards at no extra cost, accommodating teams of any size and enhancing control over every dollar spent.
  • Higher credit limits: Ramp's corporate card also stands out with its high credit limits, up to 20 times higher than traditional options, supported by precise underwriting.
  • Mobile app: The mobile app, available for iOS and Android, makes capturing receipts effortless, with features like automatic categorization for error-free expense submissions. This seamless integration of technology simplifies bookkeeping, integrates with ERP accounting systems, and provides AI insights to identify duplicative spending and unclaimed rewards.

Learn more about Ramp in our interactive product demo.

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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