Utilizing a credit card issued to a company comes with a plethora of benefits. A line of credit can be made available to the owners of small businesses, which can make it easier for them to handle their day-to-day finances. Using a credit card for your company also helps you keep track of your business expenses independently from your spending, which simplifies things for you come tax time.
There are a lot of additional advantages as well. These may consist of attractive sign-up incentives, the opportunity to earn important awards in company-specific categories, and even account management tools to make your life as a small business owner a little bit simpler.
Continue reading to find out more and to find out how to get a credit card for your business.
What's the difference between an EIN and a Social Security number (SSN)?
When you apply for a credit card for your company, the first thing that will be asked of you is information about your company. If you own a company that is officially recognised, you almost certainly have an EIN (Employer Identification Number). If this is the case, when filling out the application, you should refer to the EIN as the tax ID number and use the name of the firm as the name of the taxpayer.
However, if you run your firm as a sole owner, you might not be required to provide an EIN when applying for a business credit card. In this particular scenario, the name of the firm will be your name. Your Social Security Number will serve as your tax identification number.
Who should consider applying for a credit card for their company?
When it comes to business credit cards, a lot of individuals are concerned about the criteria that determine what qualifies as a business. If you want to apply for a business credit card, some individuals ask if you have to first establish a limited liability company (LLC) or get formally established as a firm.
Sadly, the correct response is not yes. A company credit card can be opened for (and used by) sole proprietorships as well. It makes no difference what line of work you're in; for all anyone knows, you may be a part-time ride-share driver, a freelance writer, or the proprietor of a traditional storefront enterprise that employs several people. You can get assistance with the management of your small business by applying for a small-business credit card.
The following resources provide additional information regarding company credit cards that are available to freelancers:
- Eight credit cards should be included in the wallet of any independent contractor.
- Recommendations for an independent contractor who lives outside the United States
What minimum credit score is required to apply for a credit card for a business?
The majority of business credit cards require a credit score that falls somewhere in the range of good to outstanding. That ranges from 670 to 850 points on your FICO credit score.
If your credit score falls outside of that range, you still be eligible for a business credit card that's designed for those with less-than-perfect credit. On the other hand, business credit cards for individuals with average or below-average credit tend to place more emphasis on credit building. Because of this, you will not receive the same benefits or perks that come with other credit cards when you use this one.
Learn more about credit scores for businesses by reading:
- Instructions on how to verify your company's credit score.
- What minimum credit score is required to apply for the American Express Business Gold Card?
- What kind of credit score is required for getting a credit card for a business?
- Establishing credit for your company: a five-step plan to success
Credit card categories for commercial enterprises
You will need to conduct some research to identify the business credit card that is most suitable for your needs before you apply for a business credit card. The credit card that will provide you with the best value will be determined by several factors, the most important of which are your credit score and the way you typically make purchases. If you are looking for a specific kind of card, you should already have a good idea of what you want before you start shopping.
The following are some common kinds of credit cards for businesses:
Credit cards for businesses that require collateral.
If this is your first time using a credit or if your credit score is low and needs improvement, you may have a tough time obtaining a line of credit for your company. You can get over this impediment by using a business credit card that requires a security deposit.
When compared to business credit cards that are available to persons with strong or excellent credit, secured business credit cards will not have as many features and will demand a security deposit from the cardholder. However, if you are patient and maintain good credit practises, you will eventually be able to build up your credit score and qualify for unsecured credit cards that come with greater conditions and advantages. And while you're at it, you'll be able to make the most of certain opportunities relating to your business.
Credit cards for businesses that offer cash rewards.
Cash-back business credit cards provide benefits for the day-to-day purchases you make for your company. You may be eligible for a one-time, flat-rate cash-back incentive on all of your transactions with some business credit cards. Businesses that don't spend a significant amount of money in a few key areas are good candidates for this type of straightforward incentives system.
An illustration of this would be the Capital One Spark Cash Plus credit card, which awards 2% cash back on every purchase without any restrictions. However, there is an annual cost of $150 associated with it. The Ink Business Unlimited Credit Card offers an unlimited 1.5% cash back on all of your business transactions and does not charge an annual fee. If you would like a business credit card that does not charge an annual fee, consider applying for this card.
Some business credit cards offer increased cash-back rates on purchases made in particular business-related categories while offering a regular rate (usually 1% back) on all other types of purchases made with the card. These kinds of credit cards are useful if your company makes significant purchases in a limited number of categories.
For instance, if you use the Ink Business Cash Credit Card, you will receive 5% cash back on purchases made at office supply stores as well as on telecommunication services (on the first $25,000 in total spending made during each anniversary year). In addition, you will receive 2% cash back on the first $25,000 that you spend at restaurants and petrol stations during each anniversary year. You will get 1% cash back on all other transactions, and there is no cap on the amount of cash back you can accumulate.
Credit cards for companies that travel.
If you find that you spend a significant portion of your business budget on travel expenses, you might consider opening a credit card that offers travel rewards. The majority of business travel cards award points or miles for purchases made with the card. You may also be eligible to receive more rewards for travel-related expenditures such as airfare, lodging, and food, depending on the credit card that you use for travel rewards.
If you are the owner of a small business and prefer to fly with a particular airline or stay at a particular hotel chain whenever you travel, a cobranded travel credit card might provide you with extra privileges as a reward for your loyalty to those specific companies. You'll be able to earn rewards on all of your spending with airline credit cards like the Delta SkyMiles® Platinum Business American Express Card and hotel credit cards like the Hilton Honors American Express Business Card, as well as higher bonus rewards for spending done with the respective companies products and services. They also come loaded with additional perks that are particular to the brand.
Credit cards that are good for general travel are solutions that give you flexibility and do not need you to commit to a specific hotel or airline brand. By way of illustration, if you have The Business Platinum Card® from American Express, you will earn 5 points for every dollar spent on prepaid hotels and flights booked through amextravel.com. It will also earn 1.5 points per dollar on eligible purchases made in specific business categories and purchases of $5,000 or more (on up to $2 million per calendar year). These points can be earned on transactions made using the card. For any other eligible purchases, you will get one point for every dollar spent.
Related: The Credit Card Chronicles: How a Freelance Writer and Stay-at-Home Mom Makes the Most of Their Points and Miles.
How to evaluate different types of credit cards for businesses
When you have decided what kind of business credit card you want, you can move on to evaluating the many credit cards that belong to the same category. When evaluating credit cards for small businesses, some of the most significant considerations to bear in mind include the following:
Credit score requirements
Before applying for a business credit card, it is in your best interest to be aware of your current credit score. This is because your score will need to satisfy the standards of the card you ultimately choose to obtain. Most cards demand good-to-excellent credit. However, to qualify for others, such as the Bank of America® Business Advantage Unlimited Cash Rewards Mastercard® credit card, you will need to have a good credit history.
Fortunately, there are credit cards available to owners of small businesses, such as the Capital One Spark Classic for Business or the Wells Fargo Business Secured Credit Card, who do not have credit scores that fall within the range of good to excellent. However, if you have credit that is considered to be average and you apply for a credit card that requires good or excellent credit, the likelihood of your application being declined increases. In addition, the hard credit draw that occurs when you apply for the majority of loans and credit cards can hurt your credit score.
The information regarding the Capital One Spark Classic card and the Wells Fargo Business Secured card has been gathered by The Points Guy without the involvement of any other party. The information regarding the card that can be found on this page has not been reviewed or supplied by the entity that is the issuer of the card.
Bonus for new customers or a welcome offer
Credit card providers will occasionally provide enticements in the hope of gaining your business. In addition, the sign-up bonus or welcome offer is one of the most beneficial incentives that credit cards have to offer. In most cases, your card issuer will credit your account with this incentive if you have spent a particular amount on eligible purchases during a certain period and have met the requirements for receiving this bonus. There are sign-up bonus offers available for some of the very finest business credit cards that are worth a thousand dollars or more.
Learn more about the sign-up bonuses offered by credit cards here:
There are currently credit cards available that provide sign-up bonuses of at least 100,000 points
APR.
The annual percentage rate (APR) of a credit card is the interest rate that you pay on any amounts that you are unable to pay off when your billing period comes to an end. If you make sure to pay off your total debt before the due date each month, you can avoid having to pay interest on any of your purchases.
Related: Are you paying adequate attention to the annual percentage rate (APR) on your credit card?
Offer of 0% Introductory APR to begin with
New cardholders of certain company credit cards will be allowed to make payments without being charged interest for a set period, which could be anywhere from a year to an extended period. These kinds of deals for small businesses are referred to as 0% introductory APR offers, and they might apply to debt transfers from another credit card, purchases, or both. After the introductory period has expired, the remaining balance on the card as well as any future transactions will be subject to a fixed rate of interest.
Program of merit badges
It is possible to have a straightforward experience with a rewards programme, particularly if you use a business credit card that comes with a fixed rate. However, if you decide to maximise the amount of cash back, points, or miles you earn, things have the potential to become somewhat confusing for you. You will need to keep in mind not only the various terms and conditions but also the categories that yield the greatest rates.
It is also essential to pay attention to the many redemption choices that come with a credit card. If you haven't logged into your account in a while, for instance, the points you've earned through a hotel or airline loyalty programme may become invalid. In addition, certain credit cards enable you to redeem your earnings in a variety of ways, such as by receiving statement credits, cash back, travel rewards, or gift cards. However, some may place restrictions on how you can redeem your rewards, and depending on the option you choose, the value of your points and miles may be reduced.
Learn more about the various incentive schemes here:
- IHG Rewards, as seen through the eyes of award travellers.
- How to maximise the value of your Capital One mile using these helpful tips and methods
- The definitive guide to transferring and optimising your Membership Rewards from American Express
- How to get the most bang for your buck when redeeming your Chase Ultimate Rewards points
Advantages of using a business card
Be sure to keep an eye out for the benefits associated with your card that are most important to you. You could receive an unlimited number of free employee cards or a restricted number of free employee cards, depending on the card. Most of the time, you will be able to set separate spending restrictions for each employee with the finest credit cards for small businesses. In addition to this, they will come equipped with cost management solutions that simplify the process of keeping tabs on all of your spendings.
In a related question, what distinguishes an employee card from a card issued to an authorised user?
Cost per year.
You won't have any trouble locating charge cards for businesses that don't charge an annual fee. They will also come with hefty bonuses and prizes, some of which may be a perfect match for the way you often spend your money. However, if you want a corporate credit card with greater rewards rates combined with upgraded features and privileges, such as complimentary access to airport lounges and anniversary credits, you will most likely be required to pay an annual fee for the card. However, the rewards and other benefits of the credit card may make up for the annual charge if your spending patterns are compatible with those of the credit card.
Other costs associated with credit cards.
Make sure you are informed of any additional fees associated with using a business credit card before you apply for one. These can include fees for late payments, cash advances, foreign transactions, and balance transfers; in addition, late payment penalties can be applied to the annual percentage rate.
How to apply for a business credit card
You are almost ready to apply for a business credit card once you have decided which exact credit card you would like to use. To begin, though, it is helpful to have some basic information ready to make the process of applying as fast as possible can be. Take a look at some of the information that you might be required to supply, which includes the following:
- Name of the business: a business name is not necessary for everyone. This does not need to be a "doing business as" company name if you are operating your firm under your name as the only proprietor.
- Your home address can serve as the address of your company if that is more convenient for you. business address:
- The most common types of business formations are sole proprietorships, limited liability companies, and corporations.
- Tax identification number: Depending on your business type, this can include your employer identification number or Social Security Number.
- The total amount of money that your company produces in a given year is referred to as its annual business revenue.
- When it comes to your company's age, how many years have you been in operation?
- The total number of staff members: You will be considered an employee to apply for a credit card. Therefore, enter one even if there is no one else outside yourself in your group.
The following guides contain further information on applications for company credit cards that you can read:
- Instructions for filling out an application for a Chase business credit card.
- The definitive guide to the limits that apply when applying for credit cards.
What comes next when you apply for a credit card to use for your company?
Once you apply for your company credit card, the credit card issuer will check your credit report to help evaluate if you are likely to pay back any debt you incur. This in-depth review of your credit report is reported to the three major credit agencies, which explains why your score is likely to dip for a brief period following its completion.
If the facts you provide can be easily confirmed, a conclusion might be reached very fast — in less than one minute. Don't worry if you're denied. If your application for a credit card is declined, you do have options on what to do next. You might alternatively apply for a different card, one that is more suitable to your current credit standing.
If an immediate clearance cannot be granted, you may be required to supply more information so that your identity and income may be verified. Because of this, the procedure will take significantly longer, and the decision may not get to you for at least a week.
Bottom line
Congratulations are in order if your application for a credit card for your company has been accepted. Within ten to twelve days of regular business hours, your credit card will most likely be mailed to you (though some issuers will use expedited shipping for more premium cards).
You will be well on your way to enjoying all of the benefits that come with acquiring a business credit card as long as you manage your credit card responsibly, make payments on time, and keep your credit utilisation as low as possible. You'll also be well on your way to establishing credit for your company.