Different Types of Business Credit Cards
At some point in the course of running your business, you may consider obtaining a business credit card to assist with various aspects of financial management. It’s not just brick-and-mortar or well-established businesses that seek out business credit, either. Even qualifying solo entrepreneurs and startups can secure a business credit card and take advantage of the benefits — ranging from cash back and rewards to improved cash flow and low interest rates.
Before you hit the “apply” button, it’s important to understand the different types of business credit cards. Keep this guide handy as you explore the options available to businesses.
1. General Business Credit Cards
General business cards are useful for covering a wide range of business expenses, helping business owners separate their business and personal expenses. Key features of these cards typically include:
- Higher credit limits than personal cards: Access more capital for significant expenses, such as equipment, office supplies and furnishings, marketing, and business travel.
- Rewards programs: Earn points or cash back on everyday purchases.
- Expense management tools: Integrate your card with accounting software to streamline financial management.
General business cards are ideal for businesses seeking versatility and broad benefits without focusing on specific reward categories, as detailed below.
2. Rewards Business Credit Cards
Businesses that have higher expenses in specific categories may wish to apply for a rewards business credit card. These cards benefit business owners who align their spending with the card’s reward categories. Common features include:
- Intro bonus: Earn rewards bonus when you first apply for a credit card and meet certain spend requirements.
- Points programs: Earn points on purchases and redeem them for travel, merchandise, gift cards, and more.
- Cash back: Receive a percentage of spending back as a statement credit or deposit.
- Category bonuses: Leverage higher reward rates in specific categories — for example, 5X the rewards for spending on office supplies, travel, or dining.
- Employee cards: Adding employees as authorized users and customizing spending limits can help you earn rewards faster, control your budget, and build business credit.
Rewards cards are perfect for businesses looking to maximize returns on their usual expenditures. If you’re already spending hundreds or thousands of dollars monthly on client dinners or office supplies, for instance, paying with a rewards card will help compensate you for those purchases.
3. Travel Business Credit Cards
For companies with frequent travel needs, travel business credit cards offer cost savings and unique benefits for travelers. Key advantages include:
- Travel points: Earn points for spending on flights, rental cars, hotels, and other travel-related expenses.
- Airport lounge access: Get complimentary access to airport lounges to make travel more enjoyable, especially for frequent fliers.
- Travel insurance: Gain peace of mind with coverage for trip cancellations, travel accidents, lost luggage, and other travel risks.
Travel cards are best for business owners who are frequently on the road and want to optimize their travel budgets.
4. Cash-Back Business Credit Cards
Straightforward and rewarding, cash-back cards provide a percentage of spending back in cash. Any or all of the following features may be included:
- Flat-rate cash back: Earn a set percentage back on every purchase.
- Tiered cash back: Some cards offer higher cash-back rates in certain categories like dining or office supplies.
- Statement credits: You may be able to apply cash back as a statement credit to reduce the card balance.
These cards work best for businesses that want more tangible returns on their expenditures.
5. Low-Interest Business Credit Cards
For businesses that want to reduce the cost of borrowing and manage cash flow, low-interest cards can be beneficial. Key features often include:
- Introductory 0% annual percentage rate (APR) offers: Enjoy zero interest on purchases or balance transfers for an initial period. Note that the Credit Card Act of 2009 mandates this introductory period must last a minimum of six months, after which the card issuer may convert to the rate disclosed at the initial card application.
- Lower ongoing interest rates: Card issuers may award reduced rates to qualifying businesses, helping trim interest costs over time.
- Balance transfer options: Transfer high-interest balances from other cards to a card with reduced introductory or ongoing rates to save on interest payments.
No-interest and low-interest cards are great for businesses that need to make larger purchases and pay for them over time or transfer high-interest balances.
6. Secured Business Credit Cards
Businesses with limited or poor credit history may qualify for secured cards, which limit spending and require a security deposit as collateral. Key characteristics of secured cards include:
- Security deposit: You’ll need to submit a deposit, typically matching the credit limit, to secure the card and guarantee repayment.
- Credit building: Spending responsibly with a secured card can help build or improve business credit, leading to increased borrowing power.
- Approvals: Secured cards may be easier to obtain than general business credit cards for businesses with less established credit.
Secured cards are best for new business owners, those looking to rebuild their credit, and those who want to build good financial habits without getting financially overextended.
7. Business Charge Cards
Unlike traditional credit cards, business charge cards require balances to be paid in full every month. They offer several unique features:
- No preset spending limit: If you have the means to repay in full promptly, business charge cards can let you make larger purchases based on payment history and financial standing.
- Rewards programs: Some cards offer rewards for spending, similar to those offered by credit cards.
- Financial discipline: Charge cards encourage responsible spending and prudent financial management.
Charge cards are best for businesses with good cash-flow management that can pay off balances monthly and want to avoid interest charges.
Choosing the Right Business Credit Card
Given the factors above, how can you choose the best business credit card for your business? Here are some key questions to guide your decision:
- What are your spending habits? If your expenses vary from month to month, a general business credit may work best. If you spend more in specific categories, consider a rewards or travel credit card.
- How’s your cash flow? If you need to make larger purchases and carry a balance to preserve cash flow — say, for payroll or rent — look for a low-interest credit card. If you know you’ll be able to pay off balances monthly, a business charge card is also a good option.
- What’s your credit history like? Card issuers may consider both the owner’s personal history and business credit history when determining eligibility and credit limits. They may also request trade references as part of your application. Before applying for business credit, be sure to check both types of credit reports and rectify any errors.
- What are your immediate and long-term needs? Consider how you might combine different types of cards to meet various goals, such as building credit, having increased cash flow, earning rewards, or making larger purchases.
- What are the fees and interest rates? Always read the fine print to understand each card’s perks, fees, APR, and other key features.
Which Type of Business Credit Card Is Best for You?
Familiarizing yourself with the different types of business credit cards and their distinct features and benefits can help you make an informed decision that supports your business's financial health. With the right card, you can take advantage of rewards, manage expenses, and ensure smoother cash flow. For additional information and to explore your options, visit CompareCredit.com.
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