How do small business credit cards work?

Man Using Small Business Credit CardSmall business credit cards work very similarly to personal credit cards. The nice thing is that you are able to keep your expenses for your business separate from your personal ones. This makes tax time a lot easier.

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There are a number of financial institutions where you can get a credit card for your small business. These include banks, credit unions, or directly through credit card companies.

Why is it important to have a small business credit card?

If you are a small business owner, it is important to have a credit card that is dedicated to your business purchases and expenses. It doesn’t matter if you have a very small business that is based out of your home or if you have a storefront that employs a small number of people. You should apply for one either way.

The biggest advantage to having a small business credit card is that it makes tax time a lot easier. When you fill out your tax return, there are separate sections for your personal and business expenses.

You should pay for all of your business purchases with your small business credit card and all of your personal purchases with your personal credit card. Keep the receipts separate as well. When it comes tax time, you can just look at your business credit card statement and enter in the information.

Some business credit cards actually make your job even easier by categorizing your expenses into:

  • Travel
  • Supplies
  • Utilities
  • Rent

This way there is no question as to whether the expense is business related and therefore, a write off. It also makes it a lot better if you are ever audited. For more information about how businesses and taxes work, go to the IRS site.

How do you find a small business credit card?

There are several places where you can find a credit card for your small business. If you are already banking with a bank for your small business needs, you can see what they offer in terms of business credit cards. Often this is the best way to go, as you already have a relationship with them and if you have kept your account in good standing, they will be able to approve you quickly and easily.

You can also search online for small business credit cards. There is a wide variety of credit cards available, so you can compare terms and benefits before choosing the best one for your needs. You can also compare credit cards by going to JD

Once you have found a credit card that you want, the application process is easy, very similar to applying for a personal one. Most applications will ask for your:

  • Name
  • Business name
  • Phone number
  • Address
  • Social security number
  • Annual income

Approval is usually fast, even under a couple of minutes with some online companies, and you will receive the credit card in the mail in five to seven business days, usually.

Should I look for anything in particular in a small business credit card?

The terms and benefits of small business credit cards vary so you should research a number of them and choose one that fits your needs the best.

If you are a sole proprietor and don’t make a lot of purchases, you may just want a basic small business credit card that has low rates, no annual fee, and no bells and whistles.

If you are a business owner who uses your credit card for many purchases, you may want to look for one that offers reward points. If you do a lot of travel for business, you may also want to look for a credit card that offers travel rewards that you can redeem for flights and hotels. Often business reward credit cards are accompanied by higher rates and annual fees, although not all of them do.

If you want your employees to have their own credit card to use for your business, this will affect which credit card you choose as well. Some companies offer spending limits and tracking of your employees’ spending.

What else should you keep in mind about small business credit cards?

Just like using a personal credit card, you want to pay off your small business credit card in full every month in order to avoid paying extra interest fees. Debt can build up fast if you are not careful. Not being able to pay off your balance every month can affect your credit limit and ability to apply for other credit cards.

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