Do You Need a Business Credit Card? & 3 Requirements to Apply

Every business needs enough purchasing power to cover daily expenses and overhead as well as unforeseen expenses. While there are multiple ways to obtain the money needed to pay for your business expenses, one option is to get a business credit card.

At Addition Financial, we provide business credit cards to our business members. There are pros and cons to buying on credit. So, with that in mind, we’ve created this guide to help you understand whether you need a business credit card and an overview of three requirements to apply for one.

What Are the Differences Between Business Credit Cards and Personal Cards?

While personal credit cards and business credit cards have some things in common, there are some important differences that you should keep in mind before applying for a business card.

  • Credit limits. Business credit cards typically come with higher credit limits than personal cards to accommodate the need for large, business-related purchases.
  • Introductory periods. It’s common for business credit cards to come with a 0% APR for an introductory period and, in many cases, that period may last longer than it would with a personal card.
  • Credit reporting. Banks and companies that issue personal credit cards report all activity to the three main credit bureaus: Equifax, Experian and TransUnion. Business card activity does not get reported to consumer credit bureaus in most cases; however, it does get reported to business credit bureaus and may impact your business credit score.
  • Rewards. The rewards on business cards tend to be related to business spending. Categories may include popular consumer rewards categories such as travel and gas but may also include office supplies, phone bills or online advertising.
  • Consumer protections. With a personal credit card, you’ll typically be protected from most liability if someone uses your credit card without permission. Those permissions are not legally required for business credit card holders although some companies do extend them out of courtesy.
  • Reporting. One big difference between personal and business credit cards is that you may get an itemized spending report from your business card, which may be helpful for your business accounting.

These differences make business credit cards more useful for entrepreneurs and business owners than personal cards.

How is a Corporate Credit Card Different from a Business Credit Card?

People may sometimes refer to a business credit card as a corporate credit card, but the two terms are not interchangeable.

With a business credit card, the financial responsibility of paying the bill goes to the person whose name is on the card. If you have a business card, you are personally liable for any charges. You will also be the person who gets the benefit of any rewards, whether they come in the form of points or cash back.

A corporate card is issued in the name of a business entity and that entity is liable for all charges. The business also receives any rewards associated with spending on a corporate card. 

On a related note, corporate cards typically require deep scrutiny of your company’s finances. You may need to meet a minimum threshold for business income and business expenditures to qualify.

Any company considering a switch from individual business cards to a corporate card should be aware that employees who were previously claiming rewards may view the switch as a downgrade in benefits.

Does Applying for a Business Credit Card Affect Personal Credit?

One of the things we get asked most frequently by people applying for business credit cards is whether there’s a risk that their personal credit will be affected. The answer, which may be frustrating to some, is yes – at least a little.

In most cases, the application will require a check of your personal credit for approval. The result is that you’ll have a hard inquiry on your credit report that will have a small impact on your credit score and stay on your report for 12 months.

There’s also the issue of who’s responsible for making business credit card payments. Even if you use the card for business purchases, the card is in your name and you are responsible for the payments. You should be making payments out of your business account but you may also be personally liable.

Many credit card companies require business card holders to sign a personal guarantee. If you fail to make your payments – or if your business fails – you’ll be on the hook personally to repay that debt.

As we mentioned above, many business credit card issuers report only to the three main business credit bureaus: Dun & Bradstreet, Equifax and Experian. However, if you’re late on your payments, those negative experiences may appear on your personal credit report.

3 Requirements to Apply for a Business Credit Card

Before you apply for a business credit card, you should know the requirements. Here are three to keep in mind, including one general requirement and two that encompass categories of information needed to apply for a business credit card.

#1 Good to Excellent Personal Credit

The first thing you’ll need to do is to check your personal credit score and determine if you qualify. For most business credit cards, you’ll need good credit, which translates to a FICO score of 670 or higher. Some cards can accommodate lower scores but those come with higher interest rates and more restrictions. If your credit score is below 670, you may want to take some time to increase it by paying down your debt and making on-time payments before you apply.

#2 Personal Information

Because a business credit card will be issued in your name (and may be backed by your personal guarantee) you’ll need to provide information about your personal finances to apply. Here are the things you’ll need:

  • Your name
  • Your birthdate
  • Your Social Security number
  • Your home address
  • Your phone number
  • Your annual income
  • Your monthly rent or mortgage payment

As we noted above, the company issuing the business credit card will do a hard inquiry on your credit to review your payment history. The reason that credit card companies review your personal credit is that they want to be sure that you have sufficient income to make credit card payments while also meeting your other financial obligations.

Keep in mind that any negative information on your personal credit reports, such as recent delinquencies or tax liens, may make it difficult to qualify for a business credit card, particularly if your business is new and you don’t have a proven track record. The longer your business has been in existence, the less weight your personal credit will carry.

#3 Business Information

Your business credit card should be used only for business expenses. When you apply, you will be asked to provide important information about your business, as follows:

  • Your business Employer Identification Number (EIN) or your social security number (your SSN will be needed if you are a sole proprietor and do not have a separate EIN.)
  • Your business name
  • Your business legal structure
  • Your industry
  • Your business address
  • The number of years you’ve been in business
  • Your annual revenue
  • The number of employees in your business
  • Your estimated monthly spending for the credit card

If you have any business partners who own at least 20% of your business, they will need to submit their Social Security numbers as well.

You should be prepared to provide financial reports to go with your application because they can help to verify your business income and expenditures.

Do You Need a Business Credit Card?

If you are a sole proprietor or just getting started, you may wonder whether you need a small business credit card. Here are some of the benefits of a business credit card:

  • It’s easy to keep your personal and business expenses separate when you have a business credit card.
  • Business credit cards make it easy to buy necessary supplies online and require less time than writing a check and less risk than paying in cash.
  • It’s easier to qualify for a business credit card in some cases than it is to get a business loan or business line of credit.
  • You can get through periods of low cash flow and still get what you need, whether it’s supplies or raw materials.
  • Having a business credit card can help you build your company’s credit, making it easier to qualify for other types of financing in the future.
  • You can get rewards that will help you pay for necessary business expenses, including gas, travel, accommodations, and even utility bills.
  • Many business credit cards provide reports at the end of the year with purchases broken down by category, which can make end-of-year accounting and bookkeeping easier than it would be otherwise.
  • After you’ve had your business card for a while, you may be able to obtain additional employee cards for your team to use to pay for their expenses.

If you own a business, then it makes sense to get a small business credit card. You’ll have the credit you need to make necessary purchases and using a business card can help you maintain separation between business expenses and personal expenses.

new business checklist

Applying for a business credit card offers many advantages to small business owners, including the potential of rewards that can pay for some expenses and the convenience of using a credit card instead of writing a check or paying with cash. Be sure to shop around and compare interest rates and rewards before you choose a card.

Are you searching for a small business credit card to help you achieve your goals? Addition Financial is here to help! Click here to read about our business credit cards and apply today.

The content provided here is not legal, tax, accounting, financial or investment advice. Please consult with legal, tax, accounting, financial or investment professionals based on your specific needs or questions you may have. We do not make any guarantees as to accuracy or completeness of this information, do not support any third-party companies, products, or services described here, and take no liability or legal obligations for your use of this information.