How to use a business credit card: Benefits, risks, and strategies

How business credit cards work for startups

A business credit card helps you manage business expenses, separate personal and business finances, and improve your business credit score. Unlike a personal credit card, it is designed specifically for small business owners and entrepreneurs, offering benefits like:

Build business credit scores and access higher credit limits

Using a business credit card responsibly helps you build business credit, which is crucial for securing business loans or a line of credit. Unlike a personal credit card, a business credit card reports your activity to credit bureaus that track business credit scores. Clearing all dues on time and maintaining low credit usage improves your creditworthiness, leading to higher credit limits and better credit card offers.

Short-term financing and rewards programs

A business credit card provides a short-term financing option without having to dip into your bank account. Some credit card issuers offer cash back, travel rewards, or rewards points on business-related expenses like advertising, business travel, and software subscriptions. Selecting the best business credit cards for your business needs can maximize these benefits.

Many business owners use their business credit cards strategically to benefit from a billing cycle that delays interest charges. Some cards also offer lower interest rates on large purchases if paid within a promotional period.

Protections, perks, and additional features

Business credit cards often include protections like fraud liability coverage, purchase security, and extended warranties. Some cards offer partnerships with vendors, providing discounts on business purchases. Additionally, using accounting software to sync your credit card account simplifies expense tracking and tax preparation.

Qualifying for a business credit card

As a startup or small business owner, you need to meet certain requirements to qualify for a business credit card. While approval criteria vary between credit card issuers, most applications assess your personal credit score, business finances, and ability to handle business spending.

Here are some more details about the general requirements for startups to qualify for a business credit card:

Personal requirements

Since a new business lacks a financial history, issuers check your personal credit score to determine your creditworthiness. Most require a good consumer credit score (usually 690 or higher) and perform a credit report check. Expect to provide:

• Full legal name
• Social Security Number or Taxpayer Identification Number
• Contact details (address, email, phone number)
• Annual income (all sources, not just business earnings)
• A personal guarantee (a commitment to repay personally if your business cannot)

Business requirements

You don’t need a registered company to get a small business credit card. Even entrepreneurs running a side business can qualify. However, issuers require business-related details such as:

• Business name and contact information
• Business structure (sole proprietorship, LLC, partnership, etc.)
• Federal Tax ID
• Years in business (if recently started, list 0)
• Annual revenue (if none, enter estimated expenses)
• Number of employees (excluding yourself)
• Business category (select from a dropdown)
• Estimated monthly business purchases on the card

Factors that affect approval

Apart from the personal and business background information, some other factors that affect the approval for a business credit card are:

• Credit history: A longer history of time payments on a personal credit card increases approval chances.
• Business revenue: While a startup can apply with zero revenue, having some income helps.
• Debt-to-income ratio: Lenders check if you have too much debt compared to earnings.
• Spending limits: High expected business-related expenses might lead to a higher credit limit.

Once approved, you can access a credit line for large purchases, improve your business credit score, and earn rewards points on business travel, office supplies, and business expenses.

Responsible use of business credit cards

Managing a business credit card wisely can help you improve cash flow, build your business credit score, and earn valuable reward points. However, poor management can lead to high interest charges, excessive debt, and damage to both your business finances and personal credit score.

These are 8 ways that you can effectively use a small business credit card while keeping spending in check:

Keep business expenses separate from personal finances

Using a personal credit card for all business transactions can complicate bookkeeping and tax filing. It can also impact your credit report, as business spending may affect your consumer credit. 

Always maintain a separate credit card account for your business-related transactions to avoid confusion and maintain financial clarity.

Pay in full and on time

Late payments can result in high interest rates, late fees, and a lower business credit score. Paying off your dues in full each billing cycle helps you avoid unnecessary interest charges and strengthens your credit history. If full payment isn’t possible, aim to pay more than the minimum due to reduce debt faster.

Monitor your credit limit and usage

Using a large portion of your credit line can negatively impact your creditworthiness. Try to keep your credit usage less than 30% of your limit to keep a healthy business credit score. High usage can make you look like a risky borrower, which makes it harder to qualify for business loans or a higher credit limit.

Choose the right business credit card

Different credit card offers come with varying benefits, so choose one that aligns with your business needs. Consider factors like:

• Cash back offers for frequent purchases like office supplies.
• Travel rewards if your business involves frequent business travel.
• No or low annual fees to keep costs manageable.

Set spending controls for employee cards

If you issue employee cards, establish clear spending limits to prevent unauthorized purchases. Many credit card issuers allow you to restrict transactions by category, amount, or location. Regularly review business spending to make sure that there is compliance with your company policies.

Leverage built-in protections and perks

Many of the best business credit cards offer protections such as fraud alerts, extended warranties, and purchase protection. Take advantage of these benefits to safeguard your business finances and reduce risk.

Review statements and use accounting software

Regularly check your credit card account for unauthorized transactions or errors. Integrating your card with accounting software can automate expense tracking, making bookkeeping and tax preparation easier. This helps you maintain a proper record of business purchases.

Understand the impact on your personal credit score

As a startup owner, your business credit card may be linked to your social security number. This means any missed payments or high balances can affect your personal credit score. Keep your credit history clean to qualify for better credit lines and lenders in the future.

Risks and benefits of business credit cards for startups

Business credit cards can be an excellent financial tool for startups, offering benefits like improved cash flow, reward programs, and simplified expense tracking. However, they also come with risks, such as high interest rates, potential overspending, and personal liability. 

So, before applying for one, make sure to weigh both the advantages and disadvantages carefully. 

Benefits of business credit cards for startups

The pros of applying for a business credit card are:

• Easier access to credit: Startups often struggle to secure loans due to limited credit history. Business credit cards provide a simpler way to access funds compared to traditional financing options.
• Improved cash flow management: You can make necessary purchases and pay them off over time, which helps manage expenses when cash flow is tight.
• Expense tracking and bookkeeping: Business credit cards simplify tracking expenses with itemized statements and online tools, making tax preparation and financial management easier.
• Rewards and incentives: A lot of business credit cards offer cash back, travel points, and other rewards on eligible spending, allowing you to save on business expenses.
• Building business credit: Responsible use, such as making on-time payments and keeping balances low, helps establish your business credit profile, which can improve your chances of securing loans with better terms in the future.
• Fraud protection: Most business credit cards come with built-in security features, including fraud alerts and liability protection for unauthorized transactions.

Risks of business credit cards for startups

While there are various benefits, keep an eye on these risks when using business credit cards:

• High interest rates: Carrying a balance month-to-month can lead to high-interest charges, increasing your overall costs compared to a business loan.
• Chances of overspending: Easy access to credit can result in unnecessary spending, putting financial strain on your startup if not managed properly.
• Personal liability risks: Many business credit cards require a personal guarantee, meaning any missed payments can affect your personal credit score and financial standing.
• Annual fees: Some credit cards come with yearly fees that may outweigh the benefits, especially if you’re not maximizing rewards or cashback programs.
• Fluctuating interest rates: Unlike fixed-rate loans, business credit cards often have fluctuating interest rates, which can increase based on market conditions or your payment history.
• Limited consumer protections: Business credit cards may not offer the same dispute protections as personal credit cards, making it harder to contest fraudulent charges or billing errors.

Wrap up

Business credit cards can be a powerful financial tool for startups, offering easy access to credit, rewards, and simplified expense tracking. However, they also come with risks like high interest rates, overspending, and potential personal liability.

Using them wisely—by paying balances on time, tracking expenses, and choosing the right card—can help you build business credit and manage cash flow effectively. Before applying, evaluate your options carefully and consider financial planning tools to stay on top of spending.

To find the best option for your startup, check out our article on the 16 best startup business credit cards in 2025.