4 reasons every small business needs its own credit card

Running a small business costs more than many people think. The average cost to start a small business in 2022 was $35,000, and that’s for an online-only business. Business owners who lease a physical store spend an average of $100,000 in the first year.

There are plenty of ways to save and bootstrap, so you don’t have to spend that much money. However, every business has its fair share of costs and needs a way to pay for them.

Some small business owners use their own personal credit cards, but this is not a good idea. If you run a business, you should get a business credit card for a few important reasons.

1. Separate business and personal expenses

Things get complicated when you use the same account for personal and business expenses. Reviewing business expenses later is more complicated and time consuming. To see how much money your company is spending, you first need to filter your personal spending. The same goes if you want to check your tax deductions.

A business credit card can make your life a lot easier. All of your business expenses are in separate accounts, so you can more quickly categorize transactions and see how much is deducted on your business taxes. Many business credit cards also include other useful features, such as detailed expense reports and integrations with popular business accounting software.

2. Get rewarded for your business spending

If you have a good credit score, you may qualify for a business rewards card. To be clear, this means your personal credit score. Card issuers still verify this when you apply for a business credit card. You don’t need a business credit score to get a card.

Business rewards cards are a simple way to earn cash back or travel points on business spending. This can be a significant amount. Select business cards earn you a flat 2% back on purchase, regardless of spending category. Some cards have a lower base rate (usually 1%), but the rate is 3% higher in the bonus category.

Let’s say you open a business card that earns 2%. Your business spends $100,000 per year. You’ll receive $2,000 cash back each year to reinvest in your business.

3. Build your business’ credit score

Business credit scores work in much the same way as personal credit scores. There are three main business credit bureaus: Dun & Bradstreet, Equifax, and Experian. To obtain a business credit score, you must apply to Dun & Bradstreet. Equifax and Experian do not require registration.

These agencies calculate a credit score for your business based on the information they receive. Using a business credit card and paying your bills on time can help boost your business credit score.

If you decide to apply for a business loan later, you will need a good business credit score. Even if you don’t plan to do so right now, it’s good to have the option.

4. Strengthening spending power

When using a credit card, it’s advantageous to pay your bill in full each month. That way, you won’t be charged interest on your purchases. This applies to personal and business credit cards.

But there are ways to finance your purchases with a business credit card without paying expensive interest rates. Some business cards have an initial APR of 0% on new purchases. No interest will be charged on purchases during the introductory period. All you have to do is make the minimum payment.

For example, if your card has a 12-month 0% introductory APR on purchases, you can finance your purchase interest-free for a year. Note: APR will increase to the card’s base rate after the intro period ends, so aim to pay off the balance before then.

Open a business credit card

Opening a business credit card doesn’t take long. Start by choosing the card you want. You’ll find suggestions in The Ascent’s list of the best business credit cards. We recommend that you narrow down your choices by first identifying the features that are most important to you, such as cashback, 0% annual interest rate for new members, and travel rewards.

Please select a card application option. The application must include personal and business information. It is okay if you do not register your business. You can apply as a sole proprietor. This means you can apply using only your Social Security number and no Employer Identification Number (EIN).

A business credit card is a valuable financial tool that every small business should have. And the application process is simple. Once you find the card that’s right for you, you’re good to go. Opening early allows you to conveniently take care of all your business expenses.

NOTE: Our top-tier cashback cards now offer a 0% introductory APR through 2025.

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