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More than half of small-business owners don’t have a business credit card, instead depending on personal credit cards to pay for business expenses, according to a recent survey by small business-focused financial platform Hello Alice.
The number of small-business owners using personal credit cards to cover operating expenses balloons to 80% when considering the “new majority” of business owners, which includes Black, Indigenous and people of color (BIPOC), women, LGBTQIA+ and immigrants.
Telling people to use business credit cards for business expenses and personal credit cards for personal expenses sounds simple. However, many of the small-business owners surveyed have reported not knowing how to complete a business credit card application or how to check their business credit score. Some also report applying for credit cards but being rejected — for both personal and business credit cards in many instances.
If you are a freelancer, entrepreneur, independent contractor or running a small business of some type, here’s what you should know about business credit cards — including why these can help your business and some good first cards for your business to consider.
Related: Who qualifies for a business credit card?
In This Post
Why businesses should have a credit card
Why is it important to use a business credit card? And why shouldn’t you use your personal credit cards to cover these expenses?
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First, keeping receipts organized and completing your tax returns can become more complicated when business and personal expenses are mixed together on the same credit card. Second, having large business expenses on your personal credit card can affect your personal credit score, due to large balances or maxing out your credit cards for operating expenses to keep your business running.
Related: How to check your credit score for free
Business credit cards do not affect your personal credit score in the same way. While a bank will typically check your personal credit report during the application process, most business credit cards will not show up on your personal credit report. This means spending heavily on a business card won’t show high credit usage on your personal credit report — though you should still make sure you are using credit cards responsibly to avoid extra fees and damaging your credit score, whether it’s personal or business.
Related: Do business credit cards affect my credit score?
Why many small businesses lack business credit cards
According to the survey of 5,000 small-business owners in this “new majority,” 90% of these owners believe having a business credit card would have a positive impact on their business because it could help cover unexpected expenses and accelerate growth.
“We’ve seen that having access to $5,000 to $25,000 of credit makes a big difference,” said Carolyn Rodz, CEO and co-founder of Hello Alice. “This allows business owners to cover everyday expenses until sales and revenue come in.”
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However, a full 45% of respondents reported a credit card denial in the past year, according to Rodz. Often, this was due to a combination of poor personal credit and a lack of credit history either personally or for the business.
Related: What credit score do you need for business credit cards?
Unfortunately, many small-business owners lack knowledge about business credit scores, according to Rodz. Compounding the issue is the fact that access to credit is not equitable across demographics. For example, Black small-business owners are twice as likely as their white counterparts to lack both a business credit card and a personal credit card, according to the survey. For many of the respondents, this was due to poor credit and a lack of knowledge about how to improve their credit scores.
Related: 8 biggest factors that affect your credit score
If a business lacks credit, starting with a secured credit card is a great option. This allows businesses to build credit through a history of paying on time and by establishing a relationship with the issuing bank. After a year or two, holders of many secured cards have the option to request that the bank convert this card into a traditional credit card.
Related: 3 real ways to boost your credit score in 30 days
Good options for your first business credit card
Assuming you’ve done the work to get your personal and business credit into a good place and are ready to apply for a business credit card, which one should you choose? There are many, and the options may feel overwhelming.
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Consider a few things before getting started. If you’re looking for your first business credit card, you probably want a card with a low annual fee or possibly no annual fee at all. While many people shy away from cards with annual fees, you shouldn’t immediately rule these out if they fit in with your business operations.
That’s because the second consideration is your business’ most common expenses. You should look for a card that earns bonus cash back or business rewards in the categories where your business is spending the most.
In addition to looking at where you can earn the most rewards for your spending, consider what you can do with those rewards. Can they only be redeemed for cash back? Can you use them for any travel by earning free hotel nights or free flights? Thinking about what type of rewards you’d like to earn and how those can help you, your loved ones, your employees and your business will be important.
Related: 10 considerations for your small business credit card strategy
Ink Business Unlimited Credit Card
Current welcome offer: Earn a $900 bonus after spending $6,000 on purchases within three months of account opening.
Annual fee: $0.
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Earning structure: Earn 1.5% cash back on all purchases.
Why we like it: The card is simple: You don’t pay an annual fee and you will earn 1.5% back without any categories to keep track of. The real power of this card comes when you also hold a card that earns Chase Ultimate Rewards points — such as the Ink Business Preferred Credit Card (discussed below) or the personal credit cards Chase Sapphire Reserve or Chase Sapphire Preferred Card. Holding one of those three cards allows you to turn your cash-back earnings into Ultimate Rewards points, thereby doubling the value of your earnings, according to TPG’s latest valuations.
For more details, read our full review of the Ink Business Unlimited card.
Official application link: Ink Business Unlimited Credit Card
Ink Business Cash Credit Card
Current welcome offer: Earn a $900 bonus after spending $6,000 on purchases within three months of account opening.
Annual fee: $0.
JOHN GRIBBEN FOR THE POINTS GUY
Earning structure: Earn 5% cash back on the first $25,000 in combined purchases in these categories each account anniversary year: office supply stores, internet services, cable services and phone services. Earn 2% cash back on the first $25,000 in combined purchases in these categories each account anniversary year: gas stations and restaurants. Earn 1% back on all other purchases. Earn 1% back on purchases above the $25,000 annual threshold in the bonus categories.
Why we like it: Some businesses spend a lot at office supply stores or on their communications services; the ability to earn 5% back on $25,000 of these expenses each year can be extremely valuable. And, as mentioned above, these cash-back earnings can be turned into Ultimate Rewards to use for travel or for elevated redemption rates with Chase’s Pay Yourself Back feature.
For more details, read our full review of the Ink Business Cash card.
Official application link: Ink Business Cash Credit Card
Ink Business Preferred Credit Card
Current welcome offer: Earn 100,000 bonus points after spending $15,000 on purchases within three months of account opening. TPG values this bonus at $2,000.
Annual fee: $95.
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Earning structure: Earn 3 points per dollar on the first $150,000 of combined spending in these categories during your cardmember year: shipping purchases, internet services, cable services, phone services, travel, and advertising purchases with social media and search engines. Earn 1 point per dollar after passing the $150,000 spending threshold and earn 1 point per dollar on all other purchases.
Why we like it: The points earned with this card are worth 2 cents each, according to our latest valuations, meaning businesses that spend heavily on advertising or shipping can get a 6% return on these expenses. Plus, the card offers perks like purchase protection and cellphone protection for a low annual fee.
For more details, read our full review of the Ink Business Preferred card.
Official application link: Ink Business Preferred Credit Card
The Blue Business® Plus Credit Card from American Express
Current welcome offer: Earn 15,000 bonus points after spending $3,000 on purchases within the first three months of cardmembership. TPG values this bonus at $300.
Annual fee: $0 (see rates and fees).
JOHN GRIBBEN FOR THE POINTS GUY
Earning structure: Earn 2 points per dollar on all purchases, up to $50,000 of spending per calendar year. After that, earn 1 point per dollar.
Why we like it: American Express Membership Rewards points are worth 2 cents each, according to TPG’s latest valuations. That means you’re earning a 4% return on purchases without needing to track any bonus categories. These points can be transferred to over 20 airline and hotel programs to redeem for travel or can be used as cash toward purchases or toward your credit card bill.
For more details, read our full review of the Amex Blue Business Plus card.
Official application link: The Blue Business Plus Credit Card from American Express
American Express® Business Gold Card
Current welcome offer: Earn 70,000 bonus points after spending $10,000 on purchases within the first three months of cardmembership. TPG values this bonus at $1,400.
Annual fee: $295 (see rates and fees).
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Earning structure: Earn 4 points per dollar in your top two spending categories each billing cycle and 1 point per dollar on all other purchases. Eligible bonus categories include airfare purchased directly from airlines, U.S. purchases for advertising on TV, radio or online, U.S. purchases of computer hardware, software and cloud solutions, U.S. gas station purchases, U.S. restaurant purchases (including takeout and delivery) and U.S. purchases for shipping. Note that you can earn 4 points per dollar on up to $150,000 in combined purchases per year, then 1 point per dollar after that.
Why we like it: Rather than needing to choose a preferred category where you earn extra rewards, the Amex Business Gold applies your rewards automatically in the categories where your business is spending the most. That’s one less thing for your business to keep track of, and you’ll earn an 8% return on these purchases according to our latest valuations. While the annual fee can appear high, getting an 8% return on $150,000 in annual purchases is worth your attention.
For more details, read our full review of the Amex Business Gold card.
Official application link: American Express Business Gold Card
Bank of America® Business Advantage Customized Cash Rewards credit card
Current welcome offer: Get a $300 statement credit after making $3,000 in purchases within 90 days of account opening.
Annual fee: $0.
JOHN GRIBBEN FOR THE POINTS GUY
Earning structure: Earn 3% back in the category of your choice: gas stations, office supply stores, travel, TV/telecom and wireless, computer services or business consulting services. Earn 2% back on dining purchases and 1% back on other purchases. Note that the 3% and 2% earning categories are limited to a total of $50,000 in combined spending each calendar year; after that, you will earn 1% back on these purchases.
Why we like it: You can choose an earning category that fits your business model, and you can change this category each month to adapt to your business operations. Cash back can be redeemed into a checking or savings account with Bank of America or as a statement credit. Plus, those who are members of Bank of America Preferred Rewards can earn rewards at up to 75% higher rates, meaning you could get up to 5.25% back on your chosen category with this card.
For more details, read our full review of the Business Advantage Customized Cash card.
Official application link: Bank of America Business Advantage Customized Cash Rewards credit card
Hello Alice Small Business Mastercard
Current welcome offer: Get a $100 statement credit when you spend $1,000 on purchases in the first three billing cycles after account opening. This offer ends Dec. 31, 2022.
Annual fee: $0.
THE POINTS GUY
Earning structure: Earn 4 points per dollar on wireless telephone services and business software purchases, 3 points per dollar on office supplies and shipping purchases, 2 points per dollar on rideshare and restaurant purchases and 1.5 points per dollar on all other purchases.
Why we like it: Business owners can use points for cash back and can earn extra points for various activities in their accounts, aimed toward rewarding business owners as they learn and grow. Additionally, cardholders get can sign up for two separate one-on-one coaching sessions on topics of their choice each year, helping them understand various issues that business owners face while starting and growing their businesses.
Click here for more details about the Hello Alice Business card.
The information for the Hello Alice Business card has been collected independently by The Points Guy. The card details on this page have not been reviewed or provided by the card issuer
Southwest Rapid Rewards Premier Business Credit Card
Current welcome offer: Earn 60,000 bonus points after spending $3,000 on purchases within the first three months of account opening. TPG values this bonus at $900.
Annual fee: $99.
THE POINTS GUY
Earning structure: Earn 3 points per dollar on purchases with Southwest Airlines, 2 points per dollar with Southwest’s hotel and car rental partners, 2 points per dollar on local transit and commuting (including rideshare apps) and 1 point per dollar on other purchases.
Why we like it: Southwest Airlines remains popular and so is travel. You may travel for business or personal reasons, but one of the most compelling reasons for putting your business spending on a Southwest credit card is the ability to earn points towards a Companion Pass, which lets you bring someone with you on all of your Southwest Airlines flights for the rest of that year and the entire following year — just pay the taxes for this person but the ticket is free. Cardholders also get 6,000 bonus points on each account anniversary, discounts on inflight purchases and 2 EarlyBird check-ins each year, as well as the ability to earn tier-qualifying points toward A-List status through credit card spending each year.
For more details, read our full review of the Southwest Premier Business card.
Official application link: Southwest Rapid Rewards Premier Business Credit Card
Bottom line
A lot goes into starting a small business. The financial side can be complicated, and your new business may lack a credit history. Understanding business credit and building your business credit can help you gain access to credit, which will free up capital to help your business do what it needs to do financially.
Unfortunately, this is more complicated for some business owners than others. New-majority business owners are less likely than previous generations of business owners to have a business credit card.
From the resources in this article, you should have a better understanding of what business credit is, how to establish it and then some quality options for a first business credit card that can suit your needs.
For rates and fees of the Amex Blue Business Plus card, click here.
For rates and fees of the Amex Business Gold card, click here.