Many small- and medium-sized companies rely on business credit cards to finance purchases that help them operate and grow their business. In fact, about 34% of small businesses relied on credit card financing in the past year to manage their capital needs, according to the National Small Business Association’s 2023 Mid-Year Economic Report.
Credit cards for small businesses offer many benefits, like increasing your cash flow, giving you quick access to financing, and helping you build business credit over time.
Small business credit cards can be an essential corporate resource, but companies must still be careful to use them responsibly—and not to let interest charges on unpaid balances spiral out of control.
Benefits of business credit cards
Business credit cards have several benefits for small- and medium-sized companies to consider. These include:
- Separate business expenses from personal expenses
- Make purchases online or in store with physical and virtual cards
- Free up cash flow when needed
- Earn rewards or cash back
- Easily track spending
- Share cards with your team and set restrictions
- Enjoy added security and fraud protection
- Build business credit with consistent, on-time payments
- Deduct annual fees and interest from business taxes
- Use 0% APR introductory offers to finance big purchases
How to get the most out of your business credit card
Here are a variety of ways your business can use a credit card to its advantage.
1. Use only for business expenses
One of the primary reasons to get a small business credit card is to create a clear distinction between business expenses and personal expenses. Dividing these expenses is important because most business expenses are tax-deductible. As a result, separating business and personal makes it easier to calculate your taxes and helps if you are audited.
Another reason business credit cards should not be used for personal expenses is that the card issuer may cancel your business card if it notices debits that are not business or corporate expenses. Also, your credit score may be negatively impacted if you make a sizable personal expenditure on your card and then miss a payment.
2. Use introductory offers wisely
Business owners are accustomed to receiving numerous offers and applications for small business credit cards in the mail. These may include enticing offers, such as zero interest for a period of time or bonus rewards points to encourage you to sign up. Overall, a small business owner must read the fine print carefully. You must also be sure to pay off the card’s balance entirely before the introductory period’s deadline, or you risk facing a steep interest rate jump.
Some small business credit cards require customers to spend a minimum amount of money within a specific period to earn a cashback or points bonus. For example, some offers mandate that $3,000 must be spent in your first three months to receive the bonus, while other offers may require you to spend $20,000. If you do earn the bonus, make sure you know whether your points have an expiration date so you get to use them in time.
3. Take advantage of rewards
Another reason small business credit cards are so popular is the ability to earn rewards, such as airline miles, cashback rewards, or shopping discounts. Typically, with a cashback credit card, the rewards start accumulating immediately. However, other rewards like airline miles and travel points may require a set amount of spending before you can start using them.
If your card offers rotating rewards categories, it’s wise to search for cards with rewards relevant to your typical business expenses. If you fly across the country or drive up and down the coast frequently for business, get a card that specializes in travel rewards for flights, hotels, and fuel. If you take a lot of clients out to dinners, find a card that offers bonus rewards at restaurants. The best small business credit cards let you accumulate points easily and use the rewards when you need to make a large purchase.
4. Avoid having to pay interest
Credit cards simplify the process of raising capital and often offer desirable rewards and cash back. However, these advantages can be negated if your company carries a balance from one month to the next and needs to pay interest on the account. To take full advantage, try to pay off your balance in full before the end of the month. This will help you avoid having to pay unnecessary interest.
5. Address fraud immediately
The ideal small business credit card provides robust fraud protection for security and peace of mind. The most secure business credit cards can help prevent unauthorized transactions and potential large financial losses for your company. If you suspect a fraudulent purchase or money withdrawal, you can lock your card or alert your card issuer that your card’s been compromised so you can get a replacement card.
6. Make use of virtual cards
Virtual credit cards give you the power to make business purchases without sharing your actual credit card account number. Equipped with different numbers than your physical credit card, you can securely use virtual cards online, or even in-store via your digital wallet.
7. Share with employees
Issuing business credit cards to your employees can improve expense tracking and allow you to set spending limits for each individual card. The best small business credit cards may even allow you to restrict where your team members can use their cards. Consider sharing virtual credit cards with your trusted employees for an added layer of security.
8. Make sure your activity is reported
Before opening a business credit card, make sure that your issuer or bank will be reporting your payment activity to the business credit bureaus. This way, when you use your card responsibly and make payments toward your balance, you’ll be building your business credit score.
As you build credit history and increase your score, your business will be set up for higher credit limits, lower interest rates, and better approval odds on business loans in the future.
Choosing the best credit card for your small business
Small business credit cards can be excellent tools for your company, but there are a few unique features that distinguish them from consumer cards. One of the main benefits of a small business credit card is the ability to divide your business spending from personal expenses, which is crucial at tax time.
When using your business credit card, always remember to do so responsibly—that means not exceeding your credit limit and only spending what you can realistically afford to repay. This will help you avoid paying unnecessary interest, which can snowball month to month.
Typically, the best credit card for your small business is a card that offers rewards that align with your business expenses, so you can make the most of your spending.