What Is a Good Business Credit Card to Start With?

A business credit card serves as a valuable financial tool for entrepreneurs, helping to streamline operations and manage expenditures efficiently. It allows for the separation of business and personal finances, which can simplify accounting and tax preparation. For new businesses, securing a business credit card represents a foundational step in establishing a credit history for the entity itself, distinct from the owner’s personal credit. This distinction is important for future financial endeavors, such as securing business loans or lines of credit.

Essential Business Credit Card Features

These features include annual fees, interest rates, credit limits, reward structures, reporting practices to business credit bureaus, and the availability of employee cards.

Annual fees are charges levied by the card issuer on a yearly basis for the privilege of holding the card. These fees can vary significantly, ranging from zero to several hundred dollars, often correlating with the card’s benefits and reward potential. Cards with higher annual fees offer more extensive reward programs or premium perks.

The interest rate, or Annual Percentage Rate (APR), determines the cost of carrying a balance on the credit card. A good APR for a business credit card falls between 15% and 20%, though rates can be lower for those with excellent credit or higher for those with less established credit. Some cards may offer introductory 0% APR periods for a set number of months, which can be beneficial for managing initial large purchases without incurring immediate interest.

Credit limits define the maximum amount of credit available on the card. For new or smaller businesses, initial credit limits might range from $5,000 to $50,000. Lenders assess a company’s financial health, including revenue, cash flow, and existing debt, to determine credit limits. For new businesses lacking extensive financial history, the owner’s personal credit score plays a substantial role in this determination.

Reward structures allow businesses to earn benefits on their spending. Common types include cash back, points, or travel miles. Cash back cards return a percentage of each purchase as a statement credit or direct deposit, with some offering higher percentages in specific spending categories like office supplies or gas. Points and travel miles programs can be redeemed for various items, including travel, merchandise, or gift cards.

Reporting to business credit bureaus is a valuable feature for establishing a distinct business credit profile. When a business credit card reports payment activity to commercial credit bureaus like Experian, Equifax, and TransUnion, responsible usage helps build the business’s credit score. This can facilitate future access to business-specific financing options.

Many business credit cards offer the ability to issue additional cards to employees. These employee cards are linked to the company’s main credit account, allowing employees to make authorized business purchases. Businesses can set individual spending limits for each employee card and gain access to detailed transaction summaries, simplifying expense tracking and management. The business remains responsible for all charges made on these employee cards.

Information Required for Application

Lenders require specific details to assess the business’s and owner’s creditworthiness.

The business’s legal structure is a fundamental piece of information requested on applications. Applicants must identify whether their business operates as a sole proprietorship, Limited Liability Company (LLC), corporation, or partnership. This distinction impacts how the application is processed and the required identification.

An Employer Identification Number (EIN) or Social Security Number (SSN) is necessary for identification. Businesses with employees or those structured as LLCs, corporations, or partnerships use an EIN. Sole proprietors, freelancers, or independent contractors use their personal SSN for business identification if they do not have an EIN.

Basic identifying information for the business, such as its full legal name and physical address, is consistently required. Sole proprietors may use their own name as the business name and their home address as the business address. The application will also ask for the number of years the business has been in operation.

Applicants need to describe their industry and the type of business activities they conduct. This information helps the issuer understand the business’s operational context and potential spending patterns.

Providing annual business revenue or sales figures is also a requirement. Even new businesses with no current revenue should provide an estimate or indicate $0 if they are just starting. This financial information helps lenders gauge the business’s capacity for repayment.

The owner’s personal credit score and history are heavily relied upon, particularly for new businesses with limited business credit history. Most business credit card issuers conduct a hard credit check on the owner, requiring a good to excellent personal FICO score, 670 or above, for approval.

Personal information for the business owner, including name, date of birth, SSN, address, email, and phone number, is required.

Common Business Credit Card Types

Secured business credit cards are designed for businesses with limited or no credit history, or those looking to rebuild their credit. These cards require a cash deposit, which serves as the credit limit. This deposit acts as collateral, reducing the risk for the issuer and making it easier for new businesses to qualify. Responsible use, including timely payments, helps establish a positive business credit profile.

Unsecured business credit cards for new businesses are general-purpose cards that do not require a security deposit. These cards are available to businesses with some established credit, though initial credit limits might be lower compared to cards for more established entities. Approval for these cards depends heavily on the business owner’s personal credit history.

Cash back business credit cards allow businesses to earn a percentage of their spending back, as a statement credit, direct deposit, or gift cards. Some offer a flat rate on all purchases, while others provide higher cash back in specific spending categories, such as office supplies, gas, or dining. These cards are suitable for businesses that prefer straightforward rewards that reduce operational costs.

Travel rewards business credit cards are designed for businesses with significant travel expenses. These cards accumulate points or miles on purchases, which can then be redeemed for flights, hotel stays, or other travel-related benefits. They come with travel perks like airport lounge access or travel insurance, making them appealing for frequent business travelers.

Low interest business credit cards are tailored for businesses that anticipate carrying a balance from month to month. These cards prioritize a lower Annual Percentage Rate (APR) over extensive reward programs. While rewards might be minimal or non-existent, a lower APR can result in substantial savings on interest charges for businesses that do not pay their balance in full each billing cycle.

Navigating the Application Process

The initial step involves selecting a card issuer and the specific card product that best meets the business’s financial requirements. This choice is made after careful consideration of features, fees, and reward structures. Online application portals are the most common method for submission, offering a convenient and faster process.

Filling out the application form requires accurately inputting the previously gathered information into the designated fields. This includes details about the business’s legal structure, tax identification number (EIN or SSN), business name and address, industry, revenue, and the owner’s personal information.

In some cases, card issuers may request supporting documents to verify the information provided in the application. This could include business registration documents, recent financial statements, or tax returns.

Before final submission, it is important to review the entire application form for any errors or omissions. After confirming accuracy, the application is formally submitted.

After submission, the approval timeline can vary. Some businesses may receive an instant approval decision, particularly if applying online and possessing a strong credit profile. However, it is more common for a decision to take a few business days, or up to two weeks, as the issuer may conduct further review or request additional information. If approved, the physical card arrives by mail within 7 to 10 business days. Upon receipt, the card requires activation, through an online portal or a phone call, before it can be used for purchases.