Business Credit Card: 5 Reasons Why Your Small Business Needs One

As a small business owner, your ultimate goal is to make money for your business. You may have an amazing product or service but if you are just getting started, making money and protecting that money may not be easy. This is even more so if you have chosen the route of being a part time entrepreneur because of the obligation constraints that you may face.

Stack of Credit Cards

Most businesses starts off in someone’s basement or home office. If you are still in that stage or even if you’ve been in business for more than ten years, there is one tool that you should seriously consider getting. As soon as your tax ID number is established and your bank account is set up, you can apply for a small business credit card. Before you balk at the idea, hear me out. There are actually 5 very important reasons why your small business may need one.

Establish Credit for Your Business

Similar to the reasons why you would get a personal credit card, a business credit card will help you establish credit for your business. After contacting a few large banks, I discovered many of them use your strong personal FICO score to approve you for a business credit card but the card does not in fact report to your personal credit bureau. Instead, just like that first credit card you got on your 18th birthday, it starts building credit for your business.

Why is this important? As your business grows, you may find a need for equipment, vehicles, or even an office space. Unless you plan on having the funds in cash, you’ll want to be able to finance these things at a low interest rate. The better your business credit, the lower your rate will be and the more likely your application will be approved.

Separating Personal and Business Expenses

Most of us enjoy the convenience of paying online, in person, or over the phone using a credit card these days. As a small business owner, having a business credit card allows you to enjoy this convenience without charging your personal card.

Also, by separating your expenses, you get to save some time during the tax season because less confusion will happen when it comes to the preparation of tax returns and the filing of income taxes.

Get Rewarded on Your Expenses

Superman with a Gift

Since you are in business to make money, shouldn’t you be making money on what you do every day? Two large, national banks, Bank of America and U.S. Bank, both offer business credit cards with up to 3% in cash back rewards. This means for every dollar you spend on your card, you earn free cash back.

Ideally, you make purchases on the credit card that you can afford to pay off at month end. By paying the statement balance in full, you avoid paying interest. This system means you are literally bringing in free money.

Don’t Take the Risk of Losing Your Cash or Checks

Making your normal purchases on a credit card protects your business. If you make a purchase online, the card is protected through Visa or MasterCard’s fraud division. If you lose cash or checks, you are putting your business finances at risk but with a credit card, if lost or compromised, a 90 second phone call can save everything you’ve worked hard to earn.

Track Your Business Expenses Without Fuss

If you are doing your own accounting, using a business credit card will save you some time as you don’t have to track your expenses vigorously. At month end, almost every bank will provide a statement, in digital or in paper, containing all the transactions incurred with the card. All you need to do by then is to input the transactions accordingly into your accounting system rather than inputting one receipt at a time.

What are Your Thoughts About Business Credit Cards?

As a business owner, you must research the best options for your company. There are a wide variety of credit products available out there. It is your responsibility to go after the ones that will continue to lead you towards success.

Which business credit card do you think is the most suitable for small business owners? What are some of the tips you have when it comes to using credit cards for business? Share your thoughts with us in the comment section below.

Image courtesy of Andres Rueda and JD Hancock

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