What is a business credit card and how do they work?

Advertiser Disclosure: Content provided by Red Ventures. Fox Business and its content partners earn compensation from the affiliate companies that appear below. This content does not include all available financial offers, and compensation may impact how and where links appear in the content.

Terms apply to American Express benefits and offers. Enrollment may be required for select American Express benefits and offers. Visit americanexpress.com to learn more. 

Individuals aren’t the only ones who can get credit cards. Companies can use business credit cards to access lines of credit and rewards on purchases. 

With the right business credit card, you can simplify expenses, earn valuable rewards, and even build business credit. But how exactly do business credit cards work, and what should you look for when applying for one? 

Here’s everything you need to know about business credit cards.

How do business credit cards work? 

A business credit card is a card that is opened under your company's name rather than your name. It functions like a personal credit card, allowing you to make purchases up to a certain limit and pay the balance off over time. The key difference is that the card is tied to your business finances. 

Using a business credit card for company expenses helps establish financial separation between personal and business transactions. This makes accounting, bookkeeping, taxes, and reporting much simpler. Many cards also come with features tailored specifically to business spending needs. 

“Personal and business spending should always be kept separate,” says Jessica Distel, certified public accountant and director of business services and development at Buckingham Advisors. “Having separate personal and business credit cards can be a way to help ensure spending does not get intertwined.”

At larger companies, business credit cards can help manage employee spending. Employees can get their cards linked to the business account with safeguards like spending limits. 

Types of business credit cards

There are several different types of business credit cards to choose from, depending on the size of the company and its needs. 

Small business cards

These cards are ideal for startups, freelancers, and small- to medium-sized businesses who want to separate personal and business expenses but don’t have the need or the qualifications for a more complex card program. These cards tend to have more modest credit limits but lower requirements for approval. 

Small business cards are similar to personal credit cards in terms of how they work. The application often requires the owner to include their information and provide a personal guarantee. That means the business owner is liable for the business credit card’s debt if the business can’t pay it off. 

Corporate cards 

Corporate cards offer a more comprehensive spend management program than small business cards. Corporate cards may include expense reporting tools and allow employees to get cards tied to the corporate account. 

Corporate cards often don't require a personal guarantee. A company must qualify based on its business credit score and the card issuer’s criteria. These cards often have better perks than small business cards, like higher limits, attractive rewards, and premium benefits. 

Purchasing cards 

Purchasing cards are typically similar to corporate cards in that they don’t require a personal guarantee and are generally used by mid-to-large businesses. 

The difference, however, is that purchasing cards are commonly used for procurement purposes — like buying office supplies, software, or the physical goods needed to make certain products — while corporate cards have a wider scope. 

While some business cards are marketed as a certain type, it may not always be clear what type of business a card is right for. It's important to look at the details of a card to see if it’s the right fit for your business, rather than only going off of the category name. 

Pros and cons of business credit cards 

Business credit cards can offer several advantages for companies managing their spending. 

“Many credit cards offer welcome bonuses, rewards such as cash back or travel rewards, low or 0% introductory rates, and special short-term financials for large purchases,” says Distel. “Every business is different and should analyze what features will benefit them the most.” 

For most businesses, the financial control and rewards offset the routine costs of using a business card. Just be sure you can pay your balance off in full each month, says Distel. Here’s a closer look at some advantages and disadvantages of business credit cards.

The best business credit cards 

Finding the best business card depends on what you hope to get out of the card. Some of the best include: 

• The Business Platinum Card® from American Express: This card comes with a hefty $695 annual fee but offers premium travel rewards and access to a wide network of airport lounges. See rates and fees. You can earn 5X points on flights and prepaid hotels purchased online through American Express Travel and 1.5X points on eligible purchases in key business categories, as well as on purchases of $5,000 or more on up to $2 million per calendar year.
• Ink Business Unlimited® Credit Card: This Chase business credit card is one of the best no annual fee credit cards. Employee card fees are also free, and you can earn unlimited 1.5% cash back on all purchases. 
• Capital One Spark Cash Plus: This card offers unlimited 2% cash back on every purchase, making it easy to rack up rewards on spending. There’s a $150 annual fee that can be refunded if your business spends at least $150,000. Remember, it’s a charge card, so there’s no APR or defined credit limit to hold back your spending. 

How to get a business credit card 

Getting a business credit is similar to getting a personal credit card. You fill out an application, and in some cases, you may get instant approval. But the specifics depend on the type of business card, the issuer, and your business’s situation. 

Qualifying criteria vary between business credit card providers. Small business cards tend to have lower requirements, while corporate cards expect strong credit and revenue. 

The best place to start is researching cards that align with your credit score range and annual business revenue. Applying for a business credit card may involve supplying business and personal information, especially if you’re applying for a small business card.

In these situations, getting a business credit card might depend on your business and personal credit scores. Here are some eligibility factors issuers evaluate: 

• Personal credit score or business credit score 
• Years in business 
• Annual business revenue Industry type 
• Legal business formation (sole proprietor, LLC, corporation, etc.) 
• Additional owners/officers tied to the business 
• Existing relationships with the issuer 

Premium business cards want to see strong credit experience before approving your application. But those just starting out have plenty of options, too. 

Consider a secured business card if your business is new or your credit needs work. These cards allow you to get approved by putting down a refundable security deposit that becomes your spending limit. It’s a great way to prove responsible usage and graduate to an unsecured card. 

Business credit vs. personal credit 

Both business and personal credit scores reflect the ability to repay debt, but there are some notable differences. 

Business credit scores are based on a scale of 0 to 100, while personal credit scores often range from 300 to 850. Business credit activity is reported to the three business credit bureaus — Experian, Equifax, and Dun & Bradstreet. 

Credit habits like making your payments on time and avoiding debt after both business and personal credit scores. But even if you have bad personal credit, your company might qualify for a card based on the business credit score, especially if you don’t have to provide a personal guarantee. 

With strong business and personal credit, you can generally qualify for better cards with better terms, like lower interest rates.

How do business cards build credit?

Building strong commercial credit is one of the most valuable benefits of using a business credit card responsibly. Your business credit report tracks your company's ability to manage debt and make timely payments. 

Using your card and paying your monthly balance can improve your business credit score over time. Higher scores unlock better terms for loans, credit cards, leases, insurance rates, and more. Some business credit cards report payment activity to business credit bureaus every month. This helps build credit faster. 

Even if your card doesn’t report your payments, you can send your statement to the bureaus to add to your company profile. 

Either way, avoiding late payments or carrying a balance is crucial. Payment history makes up the majority of your business credit score. So, staying on top of your accounts will strengthen your score as your business grows. 

How to find the best business card for you 

The best business credit card for you depends on factors like the size of your business and what you want to use the card for. While there are many great business credit cards, not all are right for every business, so you want to select the card that aligns with your goals. 

While business credit cards can be a financing tool, you want to ensure you’re comfortable with the risk these cards can create. You don’t want to end up costing yourself a lot of money — like going into credit card debt for which you may be personally liable.

 “Business owners need to understand what they can afford and be careful not to overextend their spending due to the ease of charging expenses,” Distel says. “While low or 0% introductory fee offers can be great, business owners should understand that if they do not pay off the balance by the time the promotional period ends, it could cost them an extensive amount in accrued interest.”

Editorial disclaimer: Opinions expressed are author's alone, not those of any bank, credit card issuer, or other entity. This content has not been reviewed, approved, or otherwise endorsed by any of the entities included in the post.