For business owners and employees alike, business credit cards have a lot to offer. Providing an easy way to pay for purchases while on the go at conventions, client meetings, team building activities, and other work-related functions, a corporate card can be an indispensable part of keeping operations moving forward.
However, as with all credit cards, no two business cards are exactly alike. From point accrual to redemption options, there are plenty of pros and cons to weigh when considering a business credit card account. We've covered all the basics below to help you make a decision.
What Is a Business Credit Card?
A business credit card is, simply put, a credit card designed for business purposes. In general, these kinds of cards have a higher limit and are designed for larger transactions than personal cards, offering expanded opportunities to accommodate enterprise-level spending.
These cards can be used by business owners exclusively, like in smaller operations, or by a large number of employees required to spend money in the course of business. As such, many forms of business card allow for numerous authorized users. This is in direct contrast to personal cards, many of which limit additional users to five or fewer.
Business credit cards offer many advantages for businesses of all shapes and sizes, including:
- Easy opportunities to track and categorize expenses for bookkeeping purposes
- Increased ability to monitor spending and, if necessary, dispute or reject charges
- Simplified coverage for employee spending, eliminating the need for a time-consuming reimbursement process
- Availability through major industry players, like American Express, ensuring user confidence
How Do Business and Personal Cards Differ?
If you're asking yourself why getting a business credit card versus just using your personal card for your small business needs matters, you're not alone. Many new business owners aren't necessarily ready to invest in a brand new card for the sake of a few business transactions, but these two categories are different for a reason.
While utilizing personal cards for business may be okay for sole proprietors with limited expenses and no plans for growth, a business card is much better suited for handling the larger expenses that accompany most corporate operations.
Business cards frequently offer rewards customized around business use, like cash back on office supplies or business travel rather than grocery stores and gas stations. They can also provide other perks that are beneficial in business, like no fees on unlimited cards issued to employees.
Laws and Restrictions
In many ways, business and personal cards are more alike than different. They're offered through the same servicers, like Visa and MasterCard, and work in the same way. Business cards can be used interchangeably with personal cards in many applications, like online shopping, everyday purchases, and travel reservations.
The most significant difference between business and personal card is coverage under the Credit CARD Act of 2009 — or lack thereof.
This Act, passed by then-President Obama, is a form of consumer protection designed to regulate the industry, stopping credit card companies from doing things like charging fees for hitting limits or changing interest rates without warning. However, the Act is limited to personal cards: business credit cards are not included.
While there are some rules and regulations regarding what credit card companies can and cannot do for business accounts, they are not nearly as strict as the restrictions imposed on personal cards. This isn't necessarily a bad thing; with the higher credit limits, for example, some fees that could affect personal cards are largely meaningless for corporate accounts.
Additionally, business owners generally don't use credit cards for all of their purchases like consumers do; instead, they're more commonly used for employee purchases to be covered by a company or for purchases that standard invoicing can't accommodate. This reduces the risk of events like paying interest on a growing balance.
How to Earn with Business Credit Cards
Business credit cards are often a vital asset, helping company owners to cover the expenses associated with the costs of doing business. They're also a strong resource for fast and effective expense categorization, making it easy to see how much of your cash flow is going where — and how much specific employees are spending. This can make noticing red flags easy, especially for businesses that incorporate employee expense reporting in with existing bookkeeping capabilities.
However, this isn't where the benefits end: the best business credit cards also earn points and miles for everyday spending and provide significant sign-up bonuses, just like standard individual cards. Here's what you need to know to accurately evaluate your business card options.
Most business cards, like personal credit cards, come with bonuses for new members, assuming certain criteria are met in the initial few months of use. Successfully qualifying for these bonuses can offer significant benefits for your business, helping you save big over the first three to six months. When signing up for a new credit card, here's what you can expect.
- Sign-up bonuses can vary greatly based on the card's overall purpose. For example, some cards aimed at small businesses offer 80,000 points for $5,000 in business expenses in the first three months, while cards for larger operations offer 75,000 points for $20,000 in spending in the first three months.
- Like personal cards, sign-up bonuses generally involve reaching spending quotas in the initial months of use. Pay close attention to rules: some cards require a certain amount of spending per month to maximize rewards.
Most points deposit around a month after the bonus period. Upon deposit, users are free to redeem them using any of a chosen card's rewards options. For cards that advertise cash, this may come in the form of a statement credit.
Ease of Earning Sign-Up Bonuses
Earning sign-up bonuses is generally extremely easy, especially for new or growing businesses. In these first few months or years, expenses are often high, making it simple to earn big: $5,000 in business expenses in three months, for example, means spending just $1,666 per month. That's around $415 a week or about $55 a day. A few supply orders, client dinners, and utility expenses can bring you to that limit quickly and easily.
Sign-up bonuses with steeper requirements, like 75,000 points for $20,000 in initial expenses, can seem much harder to achieve, but it's important to keep in mind that these cards are designed for high volume businesses. A brand new startup will benefit far more from cards with lower thresholds.
Points on Regular Spending
To incentivize users, business credit cards come with many ways to earn points on regular spending. This can be as simple as one point per dollar spent or more complicated, such as three points per dollar spent in approved categories. To benefit businesses, points are more commonly earned on spending related to business, such as travel or shipping.
Possibilities for earning points include options such as the hypotheticals listed below, which are modeled after real credit card offers.
- 5% cash back on office supplies and internet, cable, and phone service, 2% cash back on gas stations and restaurants, and 1% cash back on all other purchases
- 5x points on all prepaid travel expenses, like airline tickets and hotel reservations, and 1.5x points on purchases of $5,000 or more with a limit of 1,000,000 extra points each year
- 35 percent airline bonus through credit card reservation services
- Unlimited 2 percent cash back on all purchases
- 2x miles on all flight purchases, with 1.5x miles on all other business spending
Points can be redeemed in many ways, as is the case with personal rewards credit cards. While options ultimately vary from card to card, many services allow points to be used for:
- Travel perks, like free flights and hotels
- Cash back to reduce bill amounts
- Gift cards
- Online shopping at popular retailers
Note that some cards may not weigh points the same from one redemption option to another. Points are often worth one cent per point, but this can vary based on use. For example, cash back may be worth one cent per point, while a gift card purchase could be as high as 1.5 cents or as low as .5 cents.
Bonuses and Extras
Points aren't the only thing you can earn with a business credit card. Like many other forms of rewards cards, business cards often come with perks like:
- Travel concierge services
- Trip insurance
- Luggage insurance
- Roadside assistance
- Purchase protection
- TSA PreCheck clearance
- Airline lounge access
- Hotel reward program memberships
- Rental car insurance
- Fraud prevention
While seemingly minor, these kinds of options can potentially save you thousands per year. For example, airline lounge passes can cost $50 each, while rental car insurance purchased with a car can be $100 or more.
What the Bank Might Not Tell You Due to the higher use associated with business credit cards, they frequently come with higher fees. Some cards cost around $100 with the first year fee waived, while other have membership fees of $450 or more with no exclusions. If you operate on a tight budget, be sure you know what kinds of expenses to expect before taking the plunge.
In addition, not all cards will offer foreign transaction fee coverage. This may not be an issue for companies that do not travel regularly, but could prove costly for businesses with overseas operations. Charges are usually around 3 percent of the amount spent in a foreign locations, so $1,000 spent in another country could cost you and additional $30.
Note that interest rates may be higher than usual with business cards as well. With the absence of consumer protections made available to personal cards, some companies may impose fees, so check your account regularly to be sure there are no unpleasant surprises lurking.
Choosing a Business Reward Card
Business rewards cards come in all shapes and sizes, from those that prioritize travel to alternatives that favor points earned on common business expenses. Before jumping in, find time to review all card features to ensure you make a choice that will best benefit your business.