[Update: Some offers mentioned below have expired. You can view the current offers from our partners here — Chase Ink Cash, Chase Ink Plus, Blue for Business Credit Card from American Express and American Express Simply Cash Business. Disclosure: Cards from our partners are mentioned below.]
Do you run a small business such as your own company or anything from babysitting to reselling goods online? If so, then you may qualify for credit cards designed for small business use. Once you know this, the question becomes, do you really need one? Here’s how to tell.
The Perks of a Business Credit Card
The main reason small business owners want a credit card is so that they can easily separate their personal expenses from their business charges. This allows them to keep separate books for their business and to easily tally up their business expenses for the purpose of filing their taxes. And for those who control multiple business entities, having several small business credit card accounts is a useful way to keep those expenses separate.
In addition, some small business credit cards come with features designed for business use. For example, users of the Chase Ink Cash and Chase Ink Plus business credit cards (reviewed here) can use the Chase Ink app to take pictures of receipts from their purchases and tag them with customizable categories. Business credit cards can also allow the primary cardholder to set and adjust individual spending limits on employee credit cards.
Another reason to consider a business credit card is to earn credit card rewards on your most frequent purchases. For example, the American Express Simply Cash Business card offers 5% cash back for purchases at U.S. office supply stores and on wireless telephone services purchased directly from U.S. service providers. It also offers 3% cash back on a category of their choice such as advertising, shipping, gas and travel reservations.
A small business owner will want to consider using a business credit card for all of the same reasons that consumers use credit cards. These include security, convenience and benefits such as travel insurance and purchase protection. In addition, some small businesses can utilize a line of credit and the owner may wish to separate the business’s interest charges from his or her personal accounts.
Should You Avoid a Small Business Credit Card?
While there are many advantages to using a separate credit card for your small business purchases, there a few drawbacks. First, you will have an additional credit card account to manage, which can complicate your finances. In addition, having a credit card for your business can also trigger some of the same problems faced by those who have a personal credit card. For instance, a business owner could incur too much debt by overspending or making unnecessary purchases to earn rewards. And although a small business credit card might offer some perks and benefits when traveling, a small business owner may already have a personal card that offers many of these benefits.
Applying for Business Credit Cards on Your Own
Some small business owners are freelancers and sole proprietors, not companies with employees. These applicants can often be confused when applying for a small business credit card. In particular, the application will ask for an Employer Identification Number (EIN). But since freelancers and other sole proprietors might not have their businesses incorporated, they won’t know what to enter in this field and may doubt that they’re even qualified to open a small business credit card account. The solution for sole proprietors, and other small business owners without an EIN, is to use their Social Security number. In either case, the applicant’s personal credit history will be used to determine credit worthiness. Your credit score will be a major factor in whether you qualify for a business credit card. For example, the Blue for Business Credit Card from American Express requires an excellent credit score. You can check your credit scores for free on Credit.com to see where you stand.
By knowing the advantages and drawbacks of opening a business credit card account, you can make the right decision to manage your own enterprise, no matter what size it is.
At publishing time, the Chase Ink Cash, Chase Ink Plus, Blue for Business Credit Card from American Express and American Express Simply Cash Business cards are offered through Credit.com product pages, and Credit.com is compensated if our users apply and ultimately sign up for this card. However, this relationship does not result in any preferential editorial treatment.
Note: It’s important to remember that interest rates, fees and terms for credit cards, loans and other financial products frequently change. As a result, rates, fees and terms for credit cards, loans and other financial products cited in these articles may have changed since the date of publication. Please be sure to verify current rates, fees and terms with credit card issuers, banks or other financial institutions directly.
More on Credit Cards:
- An Expert Guide to Credit Cards With Rewards
- How to Get a Credit Card With Good Credit
- How Secured Cards Can Help Build Credit