Who should have a business credit card? 4 signs you’re ready to apply (2024)

You might think business credit cards exclusively belong to corporate middle managers who use them to pay for overpriced meals and hotel rooms. But if you run your own side hustle or have launched a start-up, there's a good chance you can get one of these cards — and they have plenty of uses beyond just paying for business trips.

Much like applying for a personal credit card, opening a business credit card must be done thoughtfully. Aside from understanding the fees, rewards, bonuses and interest, you'll also want to make sure you and your business are in the right place for taking full advantage of a business credit card.

Below, CNBC Select explains four signs that you may be in a good position to apply for a business credit card.

• You need to separate your business and personal expenses
• Your personal credit card has a low limit
• You have a good personal credit score
• You might need a business loan one day
• What are the best business credit cards?
• Bottom line

Juggling both personal and business expenses can get confusing, especially come tax time. Having checking accounts, savings accounts and credit cards dedicated solely to your business expenses can help protect your personal credit and cash flow.

Examples of things you might charge to a business credit card include software subscriptions, office supplies, business travel and more.

As your business starts to grow and you file for LLC or S-Corp status, it becomes even more important to keep your professional and personal expenses separate. This way, you can easily track the money that comes in and out of your business (your cash flow) and use tax deductions (such as writing off certain business expenses) to your advantage.

Perhaps most importantly, separating your work funds from your personal accounts helps protect you in the event your business suffers a severe financial setback. If someone sues your business or you have to file for bankruptcy, for example, the firewall between your accounts can prevent your personal assets from becoming fair game (depending on the structure of your business).

Your credit card limit can be influenced by a variety of factors, including your credit score and age. The average American has a credit card limit of $22,751 across all credit cards. That may sound like a lot of credit for personal use but when you're running a business — especially one with pricey inventory or that needs a lot of storage space — you may find that you need to spend more than that.

A good first step can be to add up your total monthly business costs to better understand your expenses and see whether your current personal credit limit can comfortably accommodate them. Remember, you ideally want to keep your credit utilization ratio to 30% at most to protect your credit. And while running a business doubtlessly demands some sacrifice on your part, that doesn't have to include your credit score when you can instead apply for a business credit card.

What is the credit utilization ratio?

Simply put, your credit utilization ratio is the amount of credit available to you that you're currently using. For example, if you have four credit cards and each one gives you a limit of $5,000, the total credit available to you is $20,000. If across these four cards, you have an outstanding balance of $5,000, that means your credit utilization ratio is 25%.

When you've never had business credit before, issuers may use your personal credit score to decide if they will issue you a business card. This is beneficial to those with a good credit score, but if you have a low or poor personal credit score, this can impact your ability to be approved for a business credit card with favorable terms.

You can use Experian to check your personal credit score for free before submitting an application for a business credit card. If your credit score isn't in the ideal range (good to excellent), Experian also suggests actions you can take to help improve your score, like lowering your credit utilization ratio.

Having your business expand can be exciting, but growing a business often means growing expenses. You might offer a new product, hire employees or need to purchase even more supplies. Business loans can help give you the financial room your company needs to seize on an opportunity.

For instance, the Small Business Administration (SBA) offers a 7(a) Small loan with a funding amount of up to $500,000. The SBA offers other types of loans as well with lending amounts of up to $5 million. Other lenders may also offer business loans with large funding amounts, so getting a loan can give your business a ton of flexibility.

However, approval can depend on your credit score as well as other factors like the desired loan amount. Having a higher business credit score that's well established can help you get approved for larger loans — and, oftentimes, getting a business credit card with a relatively small credit limit can help you establish your business credit in the first place.

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There are a handful of business credit cards on the market that suit a variety of business needs, including travel, office supply purchases and even cash back.

CNBC Select ranks the Capital One Spark Cash Plus Credit Card as the best business card for cash back since it offers 2% back on all purchases regardless of the category you spend in. One of this card's more unusual features is that it doesn't have an APR. However, it will charge a 2.99% late fee if you don't pay off your balance in full each month.

The Ink Business Preferred® Credit Cardis also an appealing option because it offers a strong welcome bonus of 90k bonus points after you spend $8,000 on purchases in the first 3 months from account opening. That's $900 cash back or $1,125 toward travel when redeemed through Chase Travel℠, giving you the option to redeem those points and book travel for your next business trip potentially for free.

Business credit cards can be a handy financial tool to have in your back pocket if you run any sort of company. You're ready to apply if you meet one or more of these four signs: wanting to separate business from personal expenses, needing more credit, having a good credit score to show for and/or anticipating needing a business loan.

And when you do get that first business credit card, remember to practice the same financial hygiene you would with a personal card — don't fall behind on your payments and try to pay the balance off in full each month — to keep your credit score in tip-top shape.

At CNBC Select, our mission is to provide our readers with high-quality service journalism and comprehensive consumer advice so they can make informed decisions with their money. Every business credit card review is based on rigorous reporting by our team of expert writers and editors with extensive knowledge of credit card products. While CNBC Select earns a commission from affiliate partners on many offers and links, we create all our content without input from our commercial team or any outside third parties, and we pride ourselves on our journalistic standards and ethics. See our methodology for more information on how we choose the best credit cards.

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