The bottom line? Your business could save money and get extra perks by using a small business credit card.
These cards also offer rewards, perks, and bonuses that can be useful, and oftentimes, they have much better terms than consumer credit cards. Small-business cards can help you keep your personal and business finances separate which can come in handy during tax time, where those fees and expenses can be deducted. Whether you're a multi-member LLC, sole-proprietor, or a freelancer in the "gig economy", a small business credit card might make sense.
Here are our top picks for the best small business cards available today:
WalletGeek's Best Small Business Card Picks
Applying for a Small Business Credit Card:
Like consumer credit cards, small business credit cards do have a few differences.
The application may ask for:
The Name Of Your Business
Even if you do not use a business name, you can still apply with your name. If you are a solo entrepreneur, you are the business.
Business Contact Info
This does not mean that you have to have separate addresses, email addresses or phone numbers. You can use your personal contact information for this.
A Federal Taxpayer ID Number
As a sole owner, you can use your social security number as it is a federal tax ID number already. However, if you do have a formal type of business structure, you can also use your employer identification number.
This is basically what you do in your business. The category can be broad or more niche, depending on the type of business you are in. If you get confused, just use the broader term of the service you provide.
How Long You’ve Been In Business
Pretty typical. All you have to do is state the amount of time you have been in business.
Revenue & Expenses
The revenue is just the amount of money you have brought in from your business while the expenses are all the money you have spent in order to earn your money.
Small Business Card Application Misconceptions:
There are some things you simply just don’t need in order to apply for a business credit card.
Formal Business Structure
A common misconception applicants believe is that they need a formal business structure in order to get approved for a small business credit card. It’s great if you already have an LLC, a partnership, or a corporation already structured – but if you are just a sole proprietor, YOU are the business.
Existing Business Credit History
A separate business credit file isn’t required to help you qualify for a small business credit card. You can qualify for a small business credit card based on your personal credit scores and credit history instead.
How Small Business Credit Cards Differ from Personal Cards:
Consumer credit cards and business credit cards are only different in a few ways, but these differences are critical for you to understand. You should know the following prior to applying:
You Will Have To Sign A Personal Guarantee
With nearly every small business credit card application, you are going to have agree to be personally liable. All the debt incurred will be yours. Even if your business fails, you will still be personally responsible for paying back any money you spend.
Your Personal Credit Can Be Affected
The application itself is going to show up as an inquiry on your personal credit report. This can cost you a couple of points and affect your score for a period of time. The issuer wants to ensure that you are personally responsible for your finances before allowing you to borrow money. Small business cards also fall into two categories. One will report your account payment history only to commercial credit bureaus and others will report to both commercial and consumer credit bureaus. Either way, your spending habits will affect your personal and business credit.
Small Business Cards Usually Aren’t Covered By Credit Consumer Protection Laws
The Credit Card Accountability Responsibility and Disclosure Act of 2009 set limits on fees, interest charged, disclosures, and guaranteed protections for personal credit cards. However, this act does not usually apply to small business credit cards. Issuers may sometimes extend these consumer protections for small business credit cards, but they are not required to.
Credit Scores – Business vs. Personal:
Like individuals, businesses also have credit scores. The key differences in credit reporting include:
Consumer and business reporting bureaus are different entities.
While consumer credit scores range from 300-850, business scores are typically 0 to 100.
The algorithms that are used in consumer credit bureaus are similar, even though they collect information independently from one another. This means that your business credit score can vary from bureau to bureau.
Business credit does require you to pay to see your company’s report which is different from your personal credit report.
All of your business credit information is publicly available.