Work for Yourself? Here's How a Business Credit Card Could Help

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My partner and I have easily had 20 or more business credit cards over the years, and that includes the four or five we now use on a regular basis. 

Most of them are Chase credit cards that earn valuable rewards we can pool in a single account. Ultimately, I use my Ink Business Unlimited® Credit Card* for the bulk of my business spending and bills. Not only does it come with no annual fee and an intro APR offer for purchases, but it also earns 1.5% cash back on purchases. 

We pool all our rewards from business and personal Chase credit cards into a single account before we redeem. This strategy makes redeeming rewards incredibly convenient, and it also unlocks the option for premium travel redemptions through Chase airline and hotel partners.

Business credit cards can help all kinds of entrepreneurs and business owners, regardless of how big the business is or how old it is. So whether you're the CEO of a bustling business or a part-time freelancer, here's how a business credit card could help you.  

How business credit cards work

Business credit cards work similarly to personal credit cards. They can be a useful tool that can make it convenient to pay for expenses while helping you build credit and earn rewards. But if you don't use credit cards responsibly, they can also hurt your credit and leave you in debt.

Most business cards have higher credit limits, and the spending categories are usually business-specific. Instead of earning rewards for categories like groceries and gas, businesses can earn rewards on travel, utilities and office supplies.

Like some personal credit cards, a business card may also come with a 0% introductory APR period, where you won't accrue interest on new purchases for a period of time. Some also have a lucrative welcome bonus. 

Once you start accumulating rewards, you can then redeem them to help offset other business expenses. Depending on your issuer, you may use rewards toward travel, a statement credit or new business purchases. 

Who qualifies for a business card?

Any business owner, from dog walkers to corporate leaders, is eligible for a business credit card. Whether you're a sole proprietor, self-employed, in a partnership or lead a corporation, you can qualify for a business credit card. 

Gig workers and people who are self-employed can also qualify for a small-business credit card. You don't even need employees on the payroll.

The age of your business doesn't matter -- any business, including a startup, can qualify for a business credit card. If you don't have a business credit history, the lender will use your personal credit score and credit history to help evaluate your creditworthiness.  

By getting a business credit card, you'll be able to start developing a credit profile for your business. But remember that there's a good chance you'll still be personally liable for any debt incurred on business credit cards.

Can you use your personal credit card for your business?

There are no rules or laws that say you can't use a personal credit card for your business. But it's typically not the best choice for business owners. 

Ideally, you won't carry a balance and pay interest on your business credit card. But if you do, interest on business expenses is tax deductible. This applies whether you use a business or personal card, but it's much easier to track if you use your business card only for business expenses. 

Besides the tax savings, there are other reasons not to use a personal credit card for business expenses:

• It's harder to track expenses for accounting purposes.
• It weakens your personal and business legal protections if you mix expenses. 
• It won't help build business credit.
• You may miss out on specific business card rewards and benefits.
• You can't get linked employee cards; you'd have to add them as authorized users on your personal card.

Pros and cons of business credit cards

The right business credit card can help you earn rewards on regular and one-off purchases. But if you're not careful, carrying an outstanding balance can come with steep interest charges. Here are some of the benefits and drawbacks to consider.

Pros

• Separate business and personal expenses. A business credit card helps keep your personal and company expenses separate, which can be helpful come tax season. Plus, it will make it easier to budget and track both your personal and business expenses separately.
• Higher credit limit and more business perks. Business credit cards tend to have higher credit limits and may have better or more business-relevant rewards and perks. For instance, some business credit cards offer statement credits for select subscriptions and travel that could make managing your company a little easier and less costly.
• Build your business credit. Once you have a business credit card, you'll start building your business credit score. There are several business credit bureaus, but many card issuers look for a good Dun & Bradstreet score of 80 to 100. Good business credit can come in handy for future credit cards and loans.

Cons

• High APR. Business credit cards tend to come with higher credit limits but also higher annual percentage rates, or APRs. That means if you don't pay your balance in full and on time each month, you'll pay more in interest. Some business credit cards have APRs over 25%. And the penalty APR can be even higher if your payment is late.
• Business information is required. To qualify for a business credit card, you'll need to provide some information about your company or freelance work, such as your annual revenue and expenses. If you're just starting out, it may be difficult to get approved without this information.
• Annual fee. Most business credit cards come with a hefty annual fee to get the best business reward and perks. Annual fees can climb well into the hundreds of dollars. If you don't think you'll maximize the card's value with the rewards or perks you'll earn -- like statement credits and complimentary subscriptions -- it may not be worth the price tag.

The experts' take on business credit cards

Business credit cards can help all kinds of entrepreneurs and business owners, but something you may not realize is that your personal credit will help you be approved for a business card.

"If you build your personal credit, it makes obtaining business credit a lot easier," credit expert Shonda Martin said. "Most banks or financial institutions will require what's called a personal guarantee, or a guarantor, which is just you as a person. They'll pull your personal credit report to determine if you're eligible for the card."

According to credit expert Julia Menez, most business cards require a personal credit score of at least 690, but some may be even higher. When it comes to choosing the right business credit card, Menez said it's important to choose a card that fits your business goals.

Credit expert Gerri Detweiler said it's also important to know what type of rewards you're looking to earn and if you want a travel-focused card or a general rewards card.

"Just like shopping for a personal credit card, you need to know your spending habits and the types of rewards you value as a business owner," Detweiler said. "Some business owners prefer travel rewards, while others may just want to keep it simple with cash back. I've talked to business owners who save their cash back or travel points to reward employees, while others may prefer to treat themselves to a low-cost vacation."

How to choose a business credit card

When choosing which credit card is right for your business, consider all its facets, including the APRs and fees as well as the rewards and benefits. 

Travel credit cards

If you travel often, consider a business travel card that earns rewards for travel and comes with travel-related benefits. 

Cards in this niche frequently earn flexible rewards that can be redeemed for travel in more than one way. Some common perks include airport benefits like fee credits for Global Entry or TSA PreCheck or airport lounge access, as well as travel insurance benefits and annual travel credits.

Co-branded airline and hotel credit cards for businesses also tend to offer brand-specific perks. For example, these cards can come with free checked bags and priority boarding for flights with the airline or its alliance partners, a head start toward elite status and travel-related discounts.

General business rewards credit cards

A general business reward credit card can provide a solid return for your regular expenses. 

If you choose a flat-rate cash-back business card, you'll earn a fixed rate back for every qualifying business purchase. Other cards may offer boosted rewards in select categories. Business credit cards may also include cardholder perks, like purchase protection and extended warranties.

Here's a rundown of all the factors you'll want to consider as you narrow down card options:

• Choose a rewards card that aligns with your spending. If your spending varies, consider a flat-rate business card that earns no matter what you buy. If your purchases tend to fall into one category, like travel, consider a business credit card that offers rewards geared toward travel. 
• Pay attention to reward limits. If your business spending exceeds the limit on rewards categories (if one applies), the card's rewards will decrease, making it a far less valuable option.
• Take annual fees into account. Before applying for a business credit card, make sure your regular business expenses will allow you to get enough value out of the card to justify paying an annual fee. If you don't feel confident you'll earn enough in cash back or points to cover the cost of the fee, consider a card without an annual fee. 
• Consider interest rates and other costs. If there's a chance you'll carry a balance on your business credit card, compare annual percentage rates. You don't want to kick-start your business with a ton of credit card debt, so plan accordingly. 
• Look for intro APR offers. If you need time to finance a considerable expense or pay off your balance, browse business credit cards that offer a 0% introductory APR period to afford more time.

How to make the most out of your business credit card

You'll get the maximum value from your business credit card by using it responsibly and strategically to help your business grow.

• Charge only what you can afford to pay each month. You should use your business credit card like any other credit card -- charging only what your business can afford to pay back. You must also pay your balance in full each month to avoid accruing interest. 
• Keep track of (and use) all your card's benefits. Leverage your business expenses with the right business credit card to maximize its rewards potential. You can do so by taking advantage of all it has to offer, from annual statement credits to airport lounge access.
• Research and compare redemptions for rewards. When it comes time to redeem your rewards or points, make sure you're doing so in the most lucrative way. Some travel credit cards won't earn as much per point if you redeem for statement credits rather than using your rewards for airfare.
• Pair multiple business credit cards to earn more rewards over time. You may even consider applying for multiple business credit cards. This can help you maximize rewards on all purchases and is particularly manageable if you have at least one business card with no annual fee.
• Always pay your bill on time. Be sure you're paying on time to avoid any financial headaches that come with missing a payment. Pay off your full statement balance each month to avoid interest charges, and keep an eye on your employee's spending (if they are linked to the account).

How to apply for a business credit card

Applying for a business credit card is similar to the process of applying for a personal credit card, but the card issuer will likely require additional information about your business.

1. Check your credit history and score. If you have a new business, the credit card issuer will look at your personal credit to determine your creditworthiness for a business credit card. Once you build a business credit score, you can then use this score to apply for other business credit cards and loans. Most business credit cards require good to excellent credit (approximately a 670 FICO score or higher).
2. Choose a card that aligns with your business needs. First look at which business credit cards best align with your business spending habits.Then review redemption options to see if you can easily redeem your rewards to save money -- whether for travel or cash back to cover another expense. 
3. Head to the card page and prepare to apply. Applying for a business credit card is similar to applying for a personal credit card. You should apply directly on the credit card issuer's website.
4. Fill out the credit card application. In addition to the standard personal identification and financial information, be ready to provide the issuer with the business name and contact information, industry, number of years in business, number of employees and annual business revenue. You'll also submit your employer identification number (EIN) or your Social Security number (SSN).
5. Submit the application. The issuer will likely have an answer for you instantly unless it requires clarification or additional information. This could be proof of your business registration, proof of income or other forms of documentation.

FAQs

*All information about the Ink Business Unlimited Credit Card has been collected independently by CNET and has not been reviewed by the issuer.

This article includes some material that was previously published on NextAdvisor, which like CNET was previously owned by Red Ventures. It has been edited and updated by CNET Money editors.