How to Use a Business Credit Card
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Using a business credit card responsibly can help build your business credit score, which can help you access other types of financing in the future. Business credit cards are also great tools for managing your cash flow.
Logistically speaking, here’s how to use a business credit card:
Charge business expenses to the card.
Receive a statement that specifies how much you borrowed over the statement period and how much you need to pay back.
Make at least the minimum payment before the due date.
Earn rewards, such as cash back or points.
But the following tips can help you get the most value out of your business credit card.
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How to use a business credit card wisely
1. Pay your bill on time and in full whenever possible
Credit cards carry higher annual percentage rates (APRs) than most other forms of business financing. If you don’t pay off your bill in full by the due date, you’ll owe interest on the remaining balance. Try to avoid paying interest whenever you can. If you need flexible financing but are consistently carrying a balance, a business line of credit may be a lower interest option if you qualify.
2. Choose the right card for your business
Most business credit cards offer rewards. Look for a cash-back business credit card with extra earnings on the categories most relevant to your business, like gas or office supplies. If you don’t have specific spending patterns, a flat-rate cash-back card can rack up rewards on all your expenses.
If you or your staff travel often, you might want a travel business credit card that offers more specific rewards — like miles on your preferred airline, status at your preferred hotel chain or points that can be redeemed for travel.
3. Monitor your credit limit
Business credit cards are valuable in part because they offer you credit when you need it, without a long application period. Try to keep your balance well below your credit limit so that you have plenty of credit available if you need it in a pinch.
Approaching your credit limit can make it difficult to access other forms of financing, too.
4. Deduct interest and annual fees on your taxes
The expenses associated with maintaining a business credit card, including annual fees, can be deducted on your business taxes. (There are plenty of no annual fee business credit cards, though.) Plus, when you use your credit card for your business spending, it should be easy to monitor your business expenses so that you can deduct those too.
5. Ensure accountability on employee cards
One advantage of business credit cards? You can issue a large number of employee credit cards, usually for no additional fee. That can empower your employees to make purchases on behalf of your business, reduce the need for reimbursements and help you track spending. Often, you can set up controls that limit how these cards can be used, but you should also have clear policies around which employees can receive a card and what they’re allowed to use it for.
If your company is larger and you want advanced, highly customizable spending controls, explore corporate cards.
Thinking about using a business credit card for personal expenses? That might not be allowed. When you sign off on a card’s terms and conditions, you often agree that you will only use your business credit card for business expenses. Rely on personal credit cards for your personal spending instead.
How to use a business credit card as a startup
If you have good or excellent credit (generally defined as a FICO score of 690 or higher), business credit cards are available to new businesses.
If you’re starting up a business, you can use a business credit card to do the following:
Access financing. Startups don’t generally have access to business loans, but credit cards offer access to short-term, flexible financing.
Access zero-interest financing, especially. You can use a business credit card with a 0% APR intro period to pay off purchases over time with no interest.
Earn a sign-up bonus. If you meet certain usage requirements, like using a business credit card to spend a certain amount of money in your first few months of having it, your card issuer may give you a reward in the form of cash or points.
Build your business credit. Using a business credit card and paying your bill on time can help your business build its credit.
Organize your finances. Separating your business and personal finances is important for every business owner. Opening a business credit card, using it for your business purchases and syncing it with your accounting software is one way to keep the two apart.
🎤 Experts say: “As a startup, you don’t have access to capital very much ... Getting that credit card is going to help your business develop a history of credit.”
- Shannon Schwabe, senior business consultant at the Michigan Small Business Development Center, speaking to NerdWallet about when to use a business credit card
NerdWallet rating 5.0 /5 | NerdWallet rating 4.8 /5 | NerdWallet rating 4.4 /5 |
Annual fee $0 | Annual fee $0 | Annual fee $0 |
Regular APR 17.99%-23.99% Variable APR | Regular APR 17.99%-25.99% Variable APR | |
Intro APR 0% intro APR on Purchases for 12 months | Intro APR 0% intro APR on Purchases for 12 months | Intro APR 0% intro APR on purchases for 12 months from the date of account opening |
Recommended credit score 690-850 (Good - Excellent) | Recommended credit score 690-850 (Good - Excellent) | Recommended credit score 690-850 (Good - Excellent) |
How to use business credit cards to grow your business
Entrepreneurs with businesses of all ages can use business credit cards to do the following:
Earn rewards. Most business credit cards offer cash back, points or miles on some or all of your spending. While they likely won’t total more than a few percentage points of your spending, these rewards can add up over time.
Manage your cash flow. Sometimes bills show up before customer payments do. A credit card offers a short-term line of credit (albeit an expensive one) that you can use to float expenses in a pinch.
Access increasing amounts of credit. Many card issuers will increase your credit limit after you’ve used the card for a little while. That allows you to tap into more financing as you need it. Plus, as you get comfortable with one card, you may want to consider opening a second for additional credit — and additional rewards.
Monitor employee spending. As your team grows, it might become useful to issue cards to your employees. Business credit cards are designed to facilitate that. Employee cards are typically free and allow the account holder to set some limits on their use.
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