Do You Need a Credit Card for Your Business?

/ BY / Small Businesses

Business credit cards provide many benefits for the owners of small to medium-sized companies. That's encouraged their widespread use; according to recent report from the Federal Reserve, 83 percent of small businesses used credit cards at the end of 2009.

One reason for the popularity of business credit cards is their convenience. Business owners who use a single credit card for both personal and business expenses can find it difficult and time-consuming to separate the two categories at tax time. But with a dedicated card for business, those owners have an accurate and easy way of keeping track the purchases that are related only to their businesses.

A business credit card may allow you to track spending by each employee that's authorized to use the business account. Some credit card companies will also let you set different spending limits for different employees.

Business credit cards may be helpful for small to medium-sized companies that have found it difficult to get a line of credit for their expenses these days. The cards can provide a needed cash flow, giving them another 20 to 30 days grace before they need to make payments.

Choosing Business Credit Cards

There are many similarities between the use of personal and business credit cards, and the considerations that go into choosing them. For example:

  • Will you be paying off the card each month, or do you plan on carrying a balance? In the first case, the interest rate may not be as important as other features of the card. But if you're going to paying off the purchases over time, you'll probably want to shop around for lower interest rates to save some money.
  • Should you pay an annual fee? While some business credit cards don't require an annual fee, the ones that do may offer some benefits that are attractive to you, like a lower interest rate or a better rewards program.
  • There are many different types of rewards programs available with business credit cards. Some may offer airline mileage, others cash back on purchases or discounts when you spend money at certain restaurants or retailers. Be sure to check the details of any rewards program carefully before you make your decision. (You may find, for example, that you don't patronize the restaurants where you're eligible for discounts or that the restrictions on airline miles are so stringent that you really can't use them.)

(For more suggestions on choosing credit cards, check out this advice from the Federal Reserve.)

A good place to start your search for business credit cards is here at and/or with the bank where you have your personal credit card account. Even if you're applying for a credit card to be used solely for your business, don't be surprised if the credit card company considers your personal credit history as well as the creditworthiness of your business when deciding whether or not to approve your application.

Differences with business credit cards

There are a few important distinctions between credit cards issued for personal use and for business use.

  • While you can use a personal credit card for business purchases, the reverse is not true. Agreements governing the use of business credit cards may specifically prohibit their use for personal expenses.
  • With a business credit, you don't enjoy the same federal law protections that you do when using a personal credit card. (Those protections include limitations on how credit card companies can increase interest rates and on late fee payments.)
  • One benefit that you will enjoy with business credit cards, however, is that the interest that you pay on your business purchases is tax deductible. That hasn't been the case with interest on personal credit cards for several years. offers a variety of business credit cards on our site. Check them out when you're ready to enjoy the convenience and benefits of having a card that's dedicated to your business.

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Please note your financial situation is unique and our tips & advice presented here may not be appropriate for your situation. recommends that you seek different advice & opinions from your own accountant or financial adviser who understands your individual circumstances before making any important decisions or implementing any financial strategy.