When first starting a business, many entrepreneurs begin using a personal credit card for expenses. It’s the path of least resistance.
However, once the business starts to thrive, you will garner tangible benefits from using a good business credit card — i.e., a credit card in your business name that is used strictly for business purposes.
Here are advantages that a business credit card can offer your business to help it grow and be profitable:
- Expands Your Overall Available Credit
- Establishes Business Credit History
- Access to Other Financial Products to Fuel Growth
- Maintains Separation of Business and Personal Expenses
- Saves Times through Technology
- Allows You to Delegate Yet Control Employee Spending
- Earn Valuable Rewards You Can Use the Way You Want To
- Building Your Credit Score
- Enhances Operational Flexibility
- Credit Card Security Features Protect Your Business
1. Expands Your Overall Available Credit
If you have ambitious dreams to grow your business, your growth may be stymied by using personal credit cards for business purposes.
Why? You may have less credit available for family purchases because you’ve already used that credit for business purposes — and vice versa.
Having a separate business credit card and separate personal credit card, each with its own credit limits, can give you more potential credit overall for your business and for your family.
2. Establishes Business Credit History
Having a business credit card helps you establish a separate credit history for your business.
Small businesses often get turned down for loans or get disadvantageous loan terms because they lack a credit history for their business. According to Tom Gazaway, founder and CEO of LenCred.com, “from the business owner’s perspective the importance of business credit has increased in recent years and all the indicators point to this trend continuing in the years to come as well. It does depend on the type of financing you apply for but the level of importance of business credit is clearly increasing.”
3. Access to Other Financial Products to Fuel Growth
Part of being a small business owner means constantly focusing on ways to increase the growth rate of your business.
One way to use a business credit card to help grow your business may not be obvious. If you choose a business card with a provider that has a wide range of products that serve businesses, it can be the start of a strong financial relationship.
For example, a company like Chase offers many business credit products. You can gain access to business-sized credit lines — beyond a credit card — to provide your business with more purchasing power and growth.
“Chase offers financial services that meet small business needs no matter where they are in the lifecycle of their business,” said Laura Miller, president of Ink from Chase. “The Ink business credit card offers extended working capital and simplifies the management of everyday financial transactions.”
4. Maintains Separation of Business and Personal Expenses
If you have a corporation or LLC, it’s important to treat your company as separate from your personal financial situation. That is important in order to maintain limitation of personal liability, according to Nolo.com. If you intermingle your personal expenses and business expenses, you could ultimately lose the very legal protection you hoped to gain by incorporating or organizing a limited liability company.
Also, for tax purposes, it is best practice to keep your business expenses separated. Only business-related expenses are deductible for a business tax return or Schedule C you file. A business credit card by its very nature will keep business expenses separate.
5. Saves Times through Technology
A business credit card that offers advanced technology does a lot of the recordkeeping work for you.
It makes the process of managing your expense budget easy, with less work on your part to see exactly where you are spending and how much. It also keeps records properly identified for tax purposes, making tax time much less of a headache.
That’s why it’s important to evaluate the technology that your credit card provider offers. The right technology can dramatically minimize the manual work needed to manage your finances.
And it’s not just any old technology to consider. Make sure it’s technology designed for business owners, delivering the right information in the right way for business use.
For example, the Ink from Chase mobile app delivers advanced recordkeeping and analysis tools.
6. Allows You to Delegate Yet Control Employee Spending
As your business grows and adds employees, delegation becomes a critical skill. You want to provide your employees authority and not require them to come to you on minor decisions. However, you need control over critical things such as your business’ finances.
That’s where a business credit card like Ink from Chase is a tremendous delegation tool and management aid. Ink offers free employee cards so you can give your employees the buying power they need within the limits you want. Monitoring each card is easy with the Ink mobile app:
- Set and adjust individual spending limits on the go.
- Get instant alerts for every purchase so you know when and where they’re spending money.
- Free employee cards help you earn rewards faster.
Get more control and rewards with every employee purchase. How’s that for balancing delegation AND maintaining control?
7. Earn Valuable Rewards You Can Use the Way You Want To
It’s a good idea to consider the rewards of your business credit card. Most people look at the amount of the rewards they can earn. That is important, of course. But the proof of the pudding is when it comes time to redeem and use those rewards.
Look for flexibility and ease in redeeming rewards. Is it easy to redeem them online? Can you use the rewards in a variety of ways — including cash back, travel and gift cards? That’s how you’ll get the most out of your card’s rewards.
Find out more about Ink from Chase business credit cards, including Ink Plus and Ink Cash.
Maximizing Credit Card Rewards
Using a business credit card wisely can turn everyday expenses into valuable rewards that contribute significantly to your company’s growth. Here’s how you can maximize rewards for your business’s benefit:
- Choose a Card That Aligns with Your Spending:
- Analyze your business’s spending habits to identify where you spend the most (e.g., travel, office supplies, telecommunications).
- Select a credit card that offers higher rewards rates in those categories to accumulate points, miles, or cash back more quickly.
- Leverage Sign-up Bonuses:
- Look for cards offering substantial sign-up bonuses, which can be a boon for your business if you meet the initial spending requirements.
- Strategically time the application for a new card to coincide with planned large purchases or business investments to meet these thresholds.
- Reinvest Rewards into Your Business:
- Use cashback rewards to offset operational costs or invest in areas needing improvement, such as marketing or new equipment.
- Redeem points or miles for business travel, reducing expenses for flights, hotels, and car rentals.
- Regularly Review and Adapt Your Strategy:
- Stay informed about any changes to your credit card’s rewards program and adjust your spending strategy accordingly.
- Consider having multiple cards for different spending categories to optimize rewards across all business expenses.
8. Building Your Credit Score
A solid credit history opens up new avenues for business expansion. Here’s how to build and leverage your business credit through the use of a credit card:
- Timely Payments and Credit Utilization:
- Ensure payments are made on time, every time. Late payments can negatively impact your business credit score.
- Keep your credit utilization low (ideally below 30%) to show lenders that you manage credit responsibly.
- Use Credit to Demonstrate Financial Reliability:
- A strong credit history signifies to lenders, suppliers, and potential partners that your business is financially stable.
- Leverage your good credit standing to negotiate better terms on loans and lines of credit, reducing costs and improving cash flow.
- Credit as a Tool for Negotiation:
- With established credit, you have the leverage to negotiate more favorable payment terms with suppliers, potentially allowing for longer payment cycles that can ease cash flow.
- Use your business credit to secure larger credit lines, providing the necessary capital to fund expansion projects without depleting cash reserves.
- Monitor and Manage Your Credit Profile:
- Regularly check your business credit report to ensure accuracy and address any issues or inaccuracies immediately.
- Understand that building credit is a continuous process; as your business grows, so does its credit needs and capabilities.
9. Enhances Operational Flexibility
The strategic use of a business credit card enhances your company’s operational flexibility, allowing for agile responses to both opportunities and challenges. Here’s how:
- Streamlined Expense Management:
- Utilize your business credit card for most expenses to centralize spending records, simplifying accounting and budget tracking.
- Employ the detailed monthly statements and online tracking tools provided by your card issuer to monitor spending patterns and adjust budgets promptly.
- Emergency Funds Access:
- A business credit card serves as a readily available source of funds for unexpected expenses, ensuring operations continue smoothly without dipping into reserves.
- This immediate access to credit can be crucial for repairing critical equipment, covering sudden operational costs, or seizing time-sensitive business opportunities.
- Flexible Cash Flow Management:
- The grace period between purchases and payment due dates provides a short-term credit advantage, improving cash flow management.
- Leverage this period to align outgoing expenses with incoming revenues, ensuring liquidity without incurring additional costs.
- Employee Empowerment:
- Issue cards to trusted employees for company expenses, empowering them to make necessary purchases and decisions swiftly, within set limits.
- This delegation not only boosts efficiency but also frees up management time for strategic planning and growth activities.
10. Credit Card Security Features Protect Your Business
In today’s digital age, protecting your business from fraud and cyber threats is paramount. Business credit cards come equipped with features designed to safeguard your company’s financial integrity:
- Fraud Monitoring and Alerts:
- Benefit from 24/7 fraud monitoring services provided by card issuers, which detect and alert you to unusual activity, potentially stopping fraud in its tracks.
- Set up customized alerts for transactions exceeding a certain amount, international purchases, or online transactions to maintain close oversight.
- Secure Online Transactions:
- Use cards with virtual account numbers for online purchases to minimize exposure of your actual account details, reducing the risk of data breaches.
- Employ cards featuring one-time-use or dynamic CVV codes that change with each transaction for additional online security.
- Zero Liability Protection:
- Take advantage of zero liability policies that protect your business from unauthorized transactions, ensuring you’re not held responsible for fraudulent charges.
- Prompt reporting of any suspicious activity plays a crucial role in activating this protection.
- EMV Chip Technology:
- EMV chips generate a unique transaction code for each use, making it harder for fraudsters to replicate your card compared to magnetic stripe cards.
- Encourage the use of chip-enabled terminals by your vendors for enhanced security of in-person transactions.
FAQs: Why Use a Business Credit Card
Why should I consider using a business credit card for my expenses instead of a personal credit card?
When starting a business, many entrepreneurs initially use personal credit cards for expenses due to convenience. However, as your business grows, utilizing a dedicated business credit card offers several advantages, such as better credit management and separation of personal and business finances.
What are the benefits of having a separate business credit card and personal credit card?
Maintaining separate credit cards for your business and personal expenses provides you with distinct credit limits. This separation expands your overall available credit, allowing you to allocate credit more effectively for both your business and family needs.
How does a business credit card help establish a credit history for my business?
Using a business credit card helps build a credit history specifically for your business. Establishing a positive credit history is crucial for obtaining favorable loan terms and financing options in the future.
Can a business credit card provide access to other financial products for business growth?
Yes, selecting a business credit card from a provider with a range of business-oriented financial products can be advantageous. For instance, some providers offer access to credit lines beyond the credit card, which can provide your business with increased purchasing power and support growth.
Why is maintaining separation between business and personal expenses important?
Maintaining separation between business and personal expenses is crucial for legal and tax reasons. Separation helps protect personal liability and ensures that you can deduct only legitimate business-related expenses for tax purposes.
How can a business credit card save time through technology?
A business credit card with advanced technology assists in managing expenses effectively. It streamlines recordkeeping, budget tracking, and tax preparation by automating tasks and providing comprehensive insights into spending patterns.
How can a business credit card help with delegating and controlling employee spending?
As your business expands, delegation becomes important. Business credit cards like Ink from Chase offer free employee cards with spending limits that you can adjust. The accompanying mobile app allows you to monitor employee spending and maintain control while delegating authority.
What rewards can I expect from a business credit card?
Business credit cards often come with valuable rewards programs. While many focus on the amount of rewards earned, it’s equally important to consider the flexibility and ease of redeeming rewards. Look for options to redeem rewards online and in various ways, such as cash back, travel, and gift cards.
Can you provide examples of specific business credit cards that offer these benefits?
Certainly, Ink from Chase offers business credit cards like Ink Plus and Ink Cash that provide the advantages mentioned above. These cards offer benefits such as flexible rewards, advanced technology, employee spending controls, and opportunities to establish a strong financial relationship.
How can I find more information about Ink from Chase business credit cards?
To learn more about Ink from Chase business credit cards, including Ink Plus and Ink Cash, you can visit the Chase website or contact their customer service for detailed information about features, benefits, and application processes.
Transitioning to a business credit card from personal use is a critical move for entrepreneurs aiming for growth. This change brings several key benefits that significantly impact your business’s development.
Advantages of Using a Business Credit Card:
- Enhanced Credit Capacity: Frees up personal credit for personal use while expanding business credit.
- Simplified Financial Management: Makes tax deductions easier and protects personal liability by keeping business expenses separate.
- Credit History Development: Helps in building a business credit profile, increasing credibility for future loans or credit lines.
- Streamlined Operations: Integrates with technology for efficient financial management, focusing more on core business activities.
- Rewarding Opportunities: Select cards offering meaningful rewards and easy redemption to reinvest in your business growth.
Choosing the Right Provider:
- It’s crucial to select a credit card issuer that aligns with your business needs, such as Chase, which offers a wide range of financial products tailored to different stages of your business lifecycle.
In conclusion, adopting a business credit card is more than a financial necessity; it’s a strategic decision that amplifies your business’s potential. By leveraging the full spectrum of benefits that a business credit card offers, entrepreneurs can ensure their business is well-positioned for expansion and success, marking a significant step forward in their entrepreneurial journey.
Well it is true that business card, can definitely show a better day with its regular usage. Since it is also held as one of the best medium to enhance business growth after its utilization at every level.
Thanks for the comment, Steve. A good business credit card can definitely help a small business grow.
– Anita
Yes. You get more credit if you register it as a business credit card. But there are some downsides to that as you are charged more. You have to carefully choose before deciding on having one for your business.
Hi Aira,
Actually, you aren’t necessarily charged more. That’s the good thing. With the Ink card from Chase, I happen to know there actually are a couple of different options. One has an annual fee, but the other does not. Finance rates are very competitive, too.
But I’d also say this: Every small businesses needs — I repeat, needs — a separate business credit card. If you want to run a business effectively, profitably and legally, in my opinion you must keep your business and personal finances separate. To me, a business credit card is not an option, it’s a requirement.
Find yourself a good one that offers advanced recordkeeping features to help streamline your business, good technology for efficiency’s sake, great rewards, credit cards for employees, and other benefits. And go for it!
– Anita
Great post Anita- You’re right that a good credit rating will help a business but I think the most important plus point of a company credit card is control. I’ve seen one too many business owners charge expenses, business lunches and even fuel costs on their personal card and then begin pulling their hair out when it’s time to file a tax return. Having one personal and one business card will help to keep everything clean and tidy
Hi Ben,
To me what you said strikes a chord.
I credit our CFO with making us much more organized so that tax time is not nearly the headache it used to be. In years past, I would have to take a few days from my regular work just to organize our tax records to send them to our accountant to prepare the tax return.
These days, we’re up to date and organized at all times. One of the things he insisted on was to maintain strict division between personal and business credit cards and other accounts. It’s amazing how much easier everything like tax preparation seems when you’re organized — hardly seems like work at all.
– Anita
I agree with the rewards portion. Aside from flight related rewards there is also cash back. I use this for my cleaning business because there are recurring supply costs every month that are paid off immediately after receiving the invoice. Saving a couple percent doesn’t seem like much of an incentive, but it adds up annually!
Hi Steven,
That’s a good point about cash back. Cash back is easier than hunting around for discounts and coupons — you get it automatically if you meet the card’s requirements.
– Anita
It is important adopt modern technology. A business card will give you an extra edge in professional life.
Business credit card is the perfect option for businesses on a tight budget but need to get things done in a timely manner. It’ll give your business an edge up other businesses. Even more, it’ll give your small business exactly what you need, because these types of credit cards cater to you.
I agree that a business credit card is a good tool for small businesses. However, if you are not organised enough to pay off the balance before the interest kicks in and you leave a large balance accruing interest obviously that can be costing you a high %.