Should I have multiple business credit cards?

Personal credit cards tend to offer a variety of general incentives, and you’ll typically be able to find one card for all your personal shopping needs. Business credit cards, on the other hand, tend to cater to specific needs, so if you run even a moderately complex business, you’ll probably need multiple cards to effectively capitalize on your purchases for rewards.

What you need to know

• A business credit card is a good way to cover expenses as long as you have the cash to pay off your balance each month so you don’t accrue unnecessary interest.
• Instead of opening multiple business credit cards, many savvy business owners opt for other forms of financing.
• Popular working capital options include business lines of credit and term loans, both of which can be effective in covering business expenses.

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Why you need a separate credit card for business

Entrepreneurs often rely on personal credit cards for expenses incurred before they’ve officially founded their business. But once operations commence, a business credit card becomes crucial for effective cash flow management.

Transitioning from a personal to a business credit card is also crucial for safeguarding your credit score. Business expenses typically exceed personal ones, sometimes vastly, which impacts the ‘amounts owed’ portion of your credit score. By using a business credit card, you’ll transfer these liabilities to the business, which separates your business expenses from your credit score and streamlines bookkeeping. 

Types of business credit cards

Business credit cards come in two main types: those with no annual fee and those that charge a fee in exchange for incentive programs. Analyze your business needs to determine which cards are worth the fee. Some different types of reward-based cards include:

• Cashback credit cards return a percentage of your purchase back to your credit card’s balance with each transaction. This cash back can also be used to offset part of your monthly fee.
• Hotel credit cards offer discounts at participating hotels. These are advantageous for businesses requiring frequent travel or overnight stays.
• Travel rewards credit cards cater to more general domestic or international travel needs. Businesses with frequent flyers may benefit from these cards, which often provide discounts on airfare, hotels, and rental cars.
• Secured business credit cards are prepaid and limited to the prepayment amount. These cards are useful to build business credit while controlling spending.

Benefits of having multiple business credit cards

You may find that several different rewards-based cards suit your business needs. Indeed, many companies opt for multiple business credit cards to leverage more rewards programs. Here are the benefits of doing so.

Get more credit access

Because each card has a set spending limit, having two or more significantly increases your spending capacity as long as you’re able to repay their balances on-time.

Maximize rewards

If you use different cards for different purchase types—for example, cashback cards for heavy spending, and hotel cards while traveling—you’ll cut costs and maximize rewards, which you can use for future expenses.

Optimize cash flow 

Using business credit cards for all your business expenses creates statements and dashboard analytics, which you can use to analyze your business and employee spending.

Build business credit

Just as managing a personal credit card responsibly can help boost your credit score, managing more than one business credit card can boost your business credit score, making it easier for you to qualify for credit or premium accounts in the future.

Take advantage of intro APR offers

Having good business credit helps make you eligible for higher APR when you open a new credit card. These higher rates only last for an introductory period, but can be substantially higher than standard rates.

How many credit cards should my business have?

There’s no limit to how many cards you can have at once, but here are some things you should consider when seeking additional cards.

• Your business credit: Assess your business credit score, and keep in mind that applications usually trigger a hard inquiry on your business credit report.
• Your revenue: Avoid taking on extra debt without adequate revenue to cover it. Make sure you have a favorable debt-to-income ratio before applying for a new card.
• Business needs: Identify which areas of your business will benefit from credit card rewards and whether having separate cards for different purchases would be a net benefit. 
• Rewards and perks: Find cash back, perks, and rewards that align with your business needs. 
• Employee cards: Some business credit cards allow you to issue employee cards, through which you can control spending while still earning rewards. Find a company that lets you manage these cards from an online dashboard—you may even be able to use virtual credit cards in addition to your physical card.
• Annual fees: Consider whether the rewards and benefits justify the annual fee, or if a no-annual-fee card is a more appropriate choice. 

When to open another business credit card

If you’re a new business, you may find it challenging to get approved for a business credit card because you lack credit history. Once you’ve established your business, you’ll technically be able to add another business credit card at any time. Each new credit line can strengthen your business credit, but you should spend only what your company can afford to pay.

Alternatives to opening multiple business credit cards

If you already have a business credit card and are seeking additional credit for your business, there are other options that may make more sense. For example, you could apply for a business loan or line of credit, both of which are good but different options.

A business loan could be a good option if you need a lump sum for a large immediate expense. You’ll pay off the loan over a pre-determined term with interest.

A business line of credit is a great fit if you need ongoing access to working capital and want to make individual draws for expenses as they come up. With a line of credit, you make repayments for each draw on a separate schedule. As you make payments, your line replenishes, which makes a line of credit an effective revolving credit option.