The importance of business credit cards for small enterprises and top recommendations

Over half of small business owners do not possess a business credit card, relying instead on personal credit cards for their business expenses, as revealed by a survey conducted by the small business-centric financial platform Hello Alice.

Advising individuals to use business credit cards for their business expenses while reserving personal credit cards for personal matters may seem straightforward. Yet, many surveyed small business owners have expressed uncertainty about how to fill out a business credit card application or how to assess their business credit score. Some have even reported unsuccessful attempts at applying for credit cards, facing rejections for both personal and business credit cards in numerous cases.

For freelancers, entrepreneurs, independent contractors, or anyone managing a small business, here’s what you need to know about business credit cards — including how they can benefit your business and some excellent initial card options to explore.

The necessity of having a credit card for businesses

What makes using a business credit card essential? And why is it unwise to rely on personal credit cards for these expenses?

Firstly, managing receipts and preparing your tax returns can become more challenging when business and personal expenses are intertwined on a single credit card. Additionally, charging significant business expenses to your personal credit card can impact your personal credit score due to high balances or overextending your credit limit for operational costs.

Business credit cards do not influence your personal credit score in the same manner. While banks usually review your personal credit report during the application, most business credit cards will not appear on it. Consequently, heavy spending on a business card won’t reflect high credit usage on your personal credit report.

Reasons many small businesses do not have business credit cards

In a survey involving 5,000 small business owners from this "new majority," 90% expressed that possessing a business credit card would benefit their operations by aiding in unforeseen expenses and fostering growth.

"Having access to credit ranging from $5,000 to $25,000 can significantly impact operations," stated Carolyn Rodz, CEO and co-founder of Hello Alice. "This support allows entrepreneurs to manage daily expenses until revenue starts flowing in."

Nevertheless, 45% of those surveyed reported facing a credit card denial within the past year, according to Rodz. This was often attributed to a mix of poor personal credit and insufficient credit history, either individually or for the business itself.

Sadly, many small business owners are not well-informed about business credit scores, as noted by Rodz.

For instance, Black small business owners are twice as likely as their white counterparts to lack both a business credit card and a personal credit card, according to the survey. Many attributed this to poor credit and insufficient understanding of how to enhance their credit scores.

If a business is without credit, starting with a secured credit card can be an excellent choice. This enables businesses to build credit by consistently making timely payments and fostering a relationship with the issuing bank.

After a period of time, typically several months, many secured cardholders can ask the bank to upgrade their card to a traditional credit card. Occasionally, the bank may automatically transition a cardholder to the unsecured version without a request.

Great choices for your initial business credit card

Once you've ensured that both your personal and business credit are in good standing and you're ready to apply for a business credit card, which one should you select? With so many choices available, it can be quite daunting.

Before diving in, keep a few factors in mind. If this is your first business credit card, you'll likely want one with a low annual fee or perhaps no fee at all.

Another important factor is the primary expenses your business incurs. Seek out a card that provides bonus cash back or rewards in the categories where your business spends the most.

Beyond focusing on maximizing rewards for your spending, think about how those rewards can be utilized. Are they exclusively redeemable for cash back? Or can they be used for travel perks like complimentary hotel stays or flights?

Considering what types of rewards you want to earn and how they can benefit you, your family, your employees, and your business is essential.

Ink Business Unlimited Credit Card

If you appreciate Chase and are on the lookout for a business card with no annual fee, the Chase Ink Business Unlimited® Credit Card could be an excellent choice.

Current welcome bonus: Receive $900 in bonus cash back after spending $6,000 on purchases within the first three months of account opening.

Annual fee: $0

Earning structure: Receive 5% cash back on Lyft rides (valid through March 2025) and 1.5% back on all other purchases.

Why we recommend it: The Ink Business Unlimited card is straightforward: no annual fee and you earn 1.5% back without having to manage multiple categories.

The true strength of this card is amplified when paired with a card that earns Chase Ultimate Rewards points — like the Chase Ink Business Preferred® Credit Card (discussed below), Chase Sapphire Reserve®, or Chase Sapphire Preferred® Card.

Having one of those three cards enables you to convert your cash-back rewards into Ultimate Rewards points, effectively enhancing the value of your earnings, according to TPG's September 2024 valuations.

For more details, check out our comprehensive review of the Ink Business Unlimited card.

Ink Business Cash Credit Card

If your business spends significantly in certain categories and you're seeking a Chase card, consider the Ink Business Cash® Credit Card as your top choice.

Current welcome bonus: Earn up to $750: $350 bonus cash back after making $3,000 in purchases within the first three months, plus an additional $400 after spending $6,000 within the first six months of account opening.

Annual fee: $0

Earning structure: As a cardholder, you will earn 5% cash back on the first $25,000 spent annually in these categories: office supply stores, internet services, cable services, and phone services.

Additionally, you'll receive 2% cash back on the first $25,000 spent each year in gas stations and restaurants. For all other purchases and any spending above the $25,000 limit in the bonus categories, you'll earn 1%.

Why we recommend it: Many businesses have substantial expenses at office supply stores or for communication services; earning 5% back on up to $25,000 in these categories annually can be highly advantageous.

Moreover, as noted earlier, these cash-back rewards can be converted into Ultimate Rewards points or utilized for enhanced redemption options with Chase's Pay Yourself Back feature if you possess another eligible Chase card.

For more details, check out our comprehensive review of the Ink Business Cash card.

Ink Business Preferred Credit Card

Entrepreneurs looking to rack up valuable Chase Ultimate Rewards points will find the Chase Ink Business Preferred Credit Card appealing.

Current welcome offer: Earn 90,000 bonus points after spending $8,000 on purchases within the first three months of opening your account. As of September 2024, TPG estimates this bonus to be worth $1,845.

Annual fee: $95

Earning structure: Accumulate 3 points for every dollar spent on the first $150,000 in these categories throughout your cardmember year: shipping, internet services, cable services, phone services, travel, and advertising with social media and search engines.

After exceeding the $150,000 spending cap, earn 1 point per dollar on all other purchases.

Why we like it: Based on TPG's assessments, the points earned with this card have a value of 2.05 cents each, allowing businesses that frequently invest in advertising or shipping to achieve a return of approximately 6% on these expenses. Additionally, the card includes benefits like purchase protection and cellphone protection for a reasonable annual fee.

For more details, check out our comprehensive review of the Ink Business Preferred card.

The Blue Business Plus Credit Card offered by American Express

For those looking to earn American Express Membership Rewards points without an annual fee (refer to rates and fees), consider The Blue Business® Plus Credit Card from American Express.

Current welcome offer: New cardholders can receive 15,000 bonus points after spending $3,000 on eligible purchases within the first three months of account opening. As per TPG's September 2024 valuations, this offer is valued at $300.

Annual fee: $0 (see rates and fees)

Earning structure: Receive 2 points for every dollar spent on all purchases, applicable to the first $50,000 spent each calendar year. Beyond that, earn 1 point per dollar for every purchase.

Why we like it: According to TPG's valuations, American Express Membership Rewards points hold a value of 2 cents each. This translates to a 4% return on purchases without the hassle of tracking bonus categories (on the first $50,000 spent annually, followed by an estimated 2% return).

These points can be transferred to more than 20 airline and hotel programs for travel redemptions or redeemed for cash to offset purchases or your credit card statement.

To learn more, check out our full review of the Amex Blue Business Plus card.

American Express Business Gold Card

You might already know about its consumer version, but the American Express® Business Gold Card is definitely worth considering if you're keen on accumulating Membership Rewards points.

Current welcome offer: New cardholders can earn 100,000 bonus points after spending $15,000 within the first three months of membership. As of September 2024, TPG values this offer at $2,000.

You might be eligible for a better welcome offer via the CardMatch tool. Offers can change at any time, and not everyone will receive the same offer.

Annual fee: $375 (see rates and fees)

Earning structure: Accumulate 4 points per dollar spent in your top two categories each billing cycle (up to $150,000 in total spending per calendar year, then 1 point per dollar) and earn 1 point per dollar on all other purchases.

Eligible bonus categories include transit expenses; U.S. costs for online, TV, and radio advertising; monthly wireless phone service bills from U.S. providers; U.S. expenditures at gas stations; U.S. dining; and purchases from U.S. electronics retailers and cloud service providers.

Additionally, you'll earn 3 points per dollar on flights and prepaid hotels booked through AmexTravel.com.

Why we like it: Instead of selecting a specific category for extra rewards, the Amex Business Gold automatically assigns rewards based on your business's top spending areas.

This simplifies your tracking, allowing you to earn an 8% return on these purchases, based on TPG's valuations (up to the first $150,000 in combined spending annually, then an estimated 2% return). Although the annual fee might seem steep, an 8% return on $150,000 in yearly spending is definitely noteworthy.

To find out more, check out our comprehensive review of the Amex Business Gold card.

Bank of America Business Advantage Customized Cash Rewards credit card

While Bank of America may not always get the spotlight like major players such as Chase and American Express, it’s definitely a worthwhile option for business owners considering the Bank of America® Business Advantage Customized Cash Rewards Mastercard® credit card.

Current welcome offer: Receive a $300 statement credit after spending $3,000 within the first 90 days of opening your account.

Annual fee: $0

Earning structure: You'll receive 3% cash back in a category of your choice, which includes gas and electric vehicle charging stations, office supply stores, travel, TV/telecom, wireless services, computer services, or business consulting services.

Additionally, you'll earn 2% cash back on dining expenses and 1% on all other purchases. Keep in mind that the 3% and 2% earning categories are capped at a combined total of $50,000 in spending each calendar year; beyond that, you'll earn 1% on those purchases.

Why we like it: You can select an earning category that aligns with your business needs and adjust this category each month to suit your operations. Cash back can be redeemed into a Bank of America checking or savings account or as a statement credit.

Moreover, members of the Bank of America Preferred Rewards® program can earn rewards at rates up to 75% higher, potentially allowing you to earn up to 5.25% back in your selected category with this card. The bonus rate depends on your balance within the program.

For more details, check out our comprehensive review of the Business Advantage Customized Cash card.

Hello Alice Small Business Mastercard

If you're not keen on a business credit card from a well-known issuer, consider the Hello Alice Small Business Mastercard®.

Current welcome offer: Receive a $50 statement credit after making $1,000 in purchases during the first three billing cycles following account opening.

Annual fee: $0

Earning structure: Receive 4 points for every dollar spent on wireless phone services and business software, 3 points for every dollar on office supplies and shipping, 2 points for every dollar on ride-hailing and dining, and 1.5 points on all other purchases.

Why we like it: Business owners can redeem points for cash back and gain additional points through various activities, designed to support their learning and growth.

Furthermore, cardholders can participate in two individual coaching sessions each year on topics they choose, assisting them in navigating the challenges of starting and expanding their businesses.

The information regarding the Hello Alice Business card has been independently gathered by Dinogo. The details presented on this page have not been reviewed or endorsed by the card issuer.

Southwest Rapid Rewards Premier Business Credit Card

As one of the leading airlines in the U.S., if your business often flies with Southwest, it might be time to consider the Southwest® Rapid Rewards® Premier Business Credit Card.

Current welcome offer: Receive 60,000 bonus points after spending $3,000 on eligible purchases within the first three months of account opening. As of September 2024, TPG values this offer at $840.

Annual fee: $99

Earning structure: Earn 3 points for every dollar spent on Southwest Airlines, 2 points per dollar with their hotel and car rental partners, 2 points per dollar on local transit and commuting (including ride-hailing services), and 1 point per dollar on all other purchases.

Why we like it: Southwest Airlines continues to be a favorite choice. Whether for business or leisure, one of the most enticing reasons to use a Southwest credit card for your business expenses is the chance to accumulate points towards a Companion Pass, allowing you to bring a guest on all your Southwest flights for that year and the next—just pay the taxes for your companion.

Cardholders receive 6,000 bonus points each year on their account anniversary, along with two EarlyBird check-ins annually, and the opportunity to earn tier-qualifying points toward A-List status through credit card spending.

To discover more, check out our full review of the Southwest Premier Business card.

Bottom line

Starting a small business involves many considerations. Grasping and developing your business credit score can provide you with greater access to credit, thus allowing you to allocate funds more effectively for your financial needs.

However, this process can be more challenging for some entrepreneurs than for others. Many new-generation business owners are less likely to possess a business credit card compared to previous generations.

This article's resources will help you gain insights into what business credit is, how to establish it, and some excellent options for your first business credit card that align with your requirements.