Should I Have a Business Credit Card?

Katie McBeth

Small business finance is certainly a stressful topic. Keeping on top of your own spending can be hard enough, but tracking all your business spending as well? It’s easy to get lost in the paperwork.

As your small business grows and matures, you’ll need to find ways to stop dipping into your personal budget. Your small business has a credit score, too, so why not utilize it? Over time you may come to a point where you’re thinking up ways to help stretch your budget just a little bit more.

Enter the business credit card. How can you know when you’re ready for a business credit card? Here are some tips to help you decide if now is the right time to expand your business’s credit.

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When Is the Right Time to Get a Business Credit Card?

A business credit card is not only an important milestone but a vital one as well. A business card can help you prevent commingling of personal and business resources, and help you keep more accurate records of your spending. There’s no question that you will need a business credit card eventually, but when is the right time to start shopping around?

Fortunately, there’s no real timeline on when you should start searching for a card. You can do it as soon as you have the idea for your business in mind. The only restrictions that might limit opening a card are your personal score and meeting the card issuer’s income requirements.

It might be smart to open up a business credit card as soon as possible. Small businesses are no strangers to hurdles during the first couple of years, and sometimes a little extra financial support can help you weather the storm.

According to author Gerri Detweiler, “Most business credit cards don’t report activity to owners’ personal credit reports unless they default… That means if one month you need to charge a large amount to stock up on inventory, for example, your personal credit scores are immune from a high balance that can hurt your scores.”

However, you will also need to be prepared for the challenges of owning a high-limit small business credit card. In particular, you’ll have to be aware of the cardholder agreement and due dates for payments. Personal credit cardholders have the protection of the Credit Card Act of 2009. Those same protections are not afforded to business cardholders. Be sure to do your homework before you sign up for your first card.

Should Freelancers Use a Business Credit Card?

Freelancers can open up a line of business credit, but is it worth the effort?

Considering that the majority of modern freelancers in the gig economy work from home — such as creative writers, graphic designers, and e-commerce gurus — it’s very unlikely that they will fit the bill of a big spender. They might make one or two big purchases throughout the year that could be placed on a credit card, but in general, freelancers are not within the demographic that normally needs a business line of credit. That being the case, freelancers should be careful when researching business credit cards.

However, there could be some benefits to opening up a separate credit account to help track your business expenses. This would work even if it’s a personal account, but you only use it for business purposes. As long as you can find a low interest rate card and prevent it from becoming maxed out, it can help tremendously come tax season.

Keeping business expenses and personal expenses separate is a smart move for freelancers, but that doesn’t always mean you have to seek out a high-limit business credit card line.

A Line of Credit vs. a Loan

There are other options for freelancers and small business owners. Specifically, a personal loan could be more preferable than a credit card.

There are a few factors to consider when weighing your options. On one hand, getting accepted for a bank loan might be a little more difficult if your business is fresh off the ground. Traditionally, bank loans need proof of profitability before they can consider funding your business. This is due to the larger amount of money that they can loan (anywhere from $50,000 to a million or more), as well as the lower interest rate and longer repayment period. Since the bank will be giving you more money, they want to make sure you’ll be able to pay them back entirely.

On the other hand, if your business is doing well and you want to expand or branch out, a bank loan might be the perfect fit. Every situation is different, but when you’re looking to spend a lot of money and pay it back over a longer period of time, the bank loan could be the right decision.

Small business credit cards work especially well for those small day-to-day expenses, as well as when you need to make minor upgrades or fill in the gap between a big sale and rent being due. There are many different applications for the small business credit card, but bank loans tend to be for the larger scale additions or purchases.

Either way, it’s important to do all your research before diving into a credit or loan account. What will your interest rate be, and how long will the payments last? Is your business’ revenue stream strong enough to ensure you won’t default on the loan or credit line? What perks can you look forward to if you get a small business credit card?

How to Open a Business Credit Card

Opening a business credit card will essentially be the same process regardless of the size of your business. In fact, the application process for a business credit card is largely the same as it is for a personal credit card, other than a few key details that must be included with the application.

You just need to research which credit card seems appropriate for your needs and fill out the application form. These application forms will usually be available online. The application will likely require information about both the business and the primary cardholder.

Necessary information that is specific to business applications includes the following elements:

  • Business name: This is the legal name of the business.
  • Employer ID number (EIN): An EIN is a unique number used by the IRS to identify a business.
  • Business type: A business will fall under one of four categories: sole proprietorship, partnership, corporation, or limited liability company.
  • Business contact information: This can include a wide range of information, such as mailing addresses, phone numbers, and email addresses.
  • Business age: This is the amount of time that a business has been open.
  • Business size: The size of a business is usually determined by the number of employees and the number of locations.
  • Annual revenue: This is the business’s yearly income.
  • Estimated expenditures: This is the estimated amount that a business spends on operations.


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