Millions of Americans operate a small business. Some have employees while many operate as independent contractors or freelancers. Whether you’re just starting out or you’ve been a business owner for years, you may wonder about whether you should get a business credit card.
The short answer is “yes.” If you have a business—even as a freelancer, independent contractor or sole proprietor—getting a business credit card can be a smart move. And if your business is structured as an LLC, S or C Corporation or other business entity, it is essential.
Learn more about choosing a business credit card so you can make the best decision for your business needs.
What is the Purpose of a Business Credit Card?
A business credit card is designed for business expenses and purchases. It allows you to separate your business and personal expenses. It can make it easier to track business expenses, making tax time less stressful.
It can help small business owners legally separate business and personal finances, but keep in mind that many business credit cards do require a personal guarantee. That means if the business doesn’t pay the debt, the card issuer may try to collect from the cardholder directly.
How Do Business Credit Cards Work?
Business credit cards work like consumer credit cards. You’ll be approved for a card, usually with a specific total amount you can charge (the credit limit). You can use the card anywhere cards of that type are accepted; for example, cards that carry a Mastercard or Visa logo can be accepted wherever Mastercard or Visa cards are accepted.
Business credit cards may help you build your business credit history as many report payment activity to at least one of the major business credit bureaus.
The good news is that many card issuers rely primarily on the personal credit score of the person who is applying, as well as income from all sources (not just the business). That means these cards may be available to new businesses as well as more established ones.