5 reasons to get a business credit card

Whether you’re a sole proprietor or a CEO, having a business credit card can benefit you and your business. In addition to making it easier to manage purchases, business credit cards offer unique perks to cardholders, such as higher credit limits and rewards tailored to business purchases. These cards can also simplify bookkeeping by keeping business expenses separate from personal ones and help with tax deductions.

If you’re a business owner, it may be worth the time to consider opening a business credit card. Here’s how and why getting a business credit card is a smart move for many growing businesses of all kinds.

1. A business credit card will help you build business credit

If you’re using your consumer bank account and credit cards for business purposes, you may be building personal credit but you won’t be building business credit. As your business grows, you’ll find that having strong business credit can help you if, for instance, you need to obtain a bank loan or trade credit from other businesses. Using a business credit card is one way to start building separate credit for your business.

2. Business credit cards have higher credit limits

Your business credit card limit will depend on your credit history and other factors, but in recent years, the average credit card limit for a business card has hovered around $56,000, according to Experian.

To give you an idea of the scale of business spending anticipated by issuers, The Blue Business® Plus Credit Card from American Express offers 2 points per dollar on the first $50,000 of business purchases a year (then 1 point per dollar), while the Ink Business Preferred® Credit Card from Chase offers 3 points per dollar on the first $150,000 spent in select business categories in a year, and 1 point per dollar on other purchases.

If you’re growing a business and need to make substantial purchases, such as a big order for inventory, you may find the higher credit limits on business cards come in handy.

3. A business credit card’s rewards and perks are meant for business purchases

Consumer credit cards are designed to provide rewards on the typical purchases you make for living expenses, such as spending at supermarkets and drugstores. Similarly, business credit cards reward typical business purchases, such as airline tickets, office supplies and technology. Using a business credit card will help you maximize those rewards.

If you run a consulting business and spend in a variety of categories, a simple, flat-rate 2 percent cash back card such as the Capital One Spark Cash Plus might work well for you, for example. But an e-commerce business may do better with the Ink Business Cash® Credit Card, which earns 5 percent cash back on the first $25,000 spent on internet, office supplies, cable and phone services each year.

Even startups have some rewarding business card options, especially if you have cash upfront. The Brex 30 Card, for example, is actually a charge card, not a credit card — meaning it’s paid in full automatically every month. You need at least $100,000 in your corporate account to qualify, but it doesn’t require a personal guarantee or credit check. You can earn generous rewards (up to 7X points) on software, restaurants and Brex Travel, among other perks.

4. Using a business credit card will streamline your bookkeeping

Bookkeeping could be a real hassle if you’re putting your business charges on a hodgepodge of personal credit cards or paying for them out of your personal funds via check, Venmo or PayPal. Putting all your business purchases on one or two business credit cards can make it a lot easier for you or your bookkeeper to balance your books every month.

In addition, most business cards offer quarterly and year-end summaries and let you sync purchase records to accounting software, so you can track spending for both your card and employees’ cards, making tax prep easier. Amex and Chase business cards integrate with QuickBooks, for example, and Capital One business cards let you download purchase records to Quicken, QuickBooks and Excel.

5. Taking tax deductions is easier when you use a business credit card

Most small-business owners don’t have the time to keep track of every possible tax deduction available to them, the way an accountant might. Many business credit cards offer helpful tallies of the different categories of spending that purchases fall into, so your accountant can easily get a high-level overview and find deductions for you. Businesses are taxed on their profits, so every legitimate deduction you take can contribute to a lower tax bill.

Bottom line

Getting a business credit card is often an important step in the growth of any business. While you can typically get away with using personal credit cards for your business during the first few months, it’s not always the best plan for your business or your finances.

Not only will a business credit card help to build business credit, but this type of card also offers perks like higher credit limits, rewards and perks tailored for business purchases, streamlined bookkeeping, and easy tracking of tax deductions. Taking the time to research the best business credit card for your business needs can pay dividends in the long run.