12 Expert-approved Business Credit Card Tips
Tricia has nearly two decades of experience in commercial and federal government lending. Her expertise is highlighted throughout small business loan content on Fit Small Business.
Benilyn has over a decade of experience as a banking officer. Her expertise is featured throughout Fit Small Business in personal finance, credit card, and real estate investing content.
This article is part of a larger series on Best Small Business Credit Cards.
Business credit cards are powerful tools for accessing business funding and building your business credit. However, when used irresponsibly, they can adversely affect your credit score and finances. Our business credit card tips can help you avoid the common credit card pitfalls so that you can take full advantage of the benefits of using your cards.
Business Credit Card Tips You’ll Learn in This Article
- Charge only what you can afford to pay.
- Pay off your bill every month.
- Use 0% annual percentage rate (APR) offers to your advantage.
- Spend less than 30% of your limit.
- Use a rewards card that aligns with your spending habits.
- Find a credit card with few fees.
- Stay away from cash advances.
- Monitor your business expenditures regularly.
- Create a credit card policy and set employee limits.
- Report a lost or missing credit card immediately.
- Take advantage of tax deductions.
- Know that you may need to provide a personal guarantee.
1. Charge Only What You Can Afford to Pay
To avoid accumulating debt, use your credit card only for purchases you can afford to pay back immediately. Whatever you charge on your card should be paid back in full by its due date. Any unpaid balance will be charged with an APR, which will increase your credit cost.
Make sure to only use your business credit card for necessary business expenses that are part of your planned budget. Over credit card usage can lead to excessive debt, which can adversely affect your business and personal credit.
2. Pay Off Your Bill Every Month
It’s best to pay off your credit card bill in full every billing cycle to avoid unnecessary costs. Credit card balances that are carried over to the next billing cycle will be charged with interest rates that can accumulate quickly. Once your balance piles up, it would be more difficult to get out of debt, and this can be detrimental to your business’s overall financial health.
However, if you cannot commit to paying off your bill in full each month, it’s best to find a business credit card that comes with a low ongoing APR to help you minimize your credit cost. Credit cards with low APRs, such as the PNC Visa® Business Credit Card and Capital On Tap Business Credit Card, are best for carrying a balance as long as you can manage your finances efficiently and not let your balance accrue excessively.
Learn more about our recommendations by reading our review of the PNC Visa® Business Credit Card and Capital On Tap Business Credit Card review.
3. Use 0% APR Offers to Your Advantage
Most business credit cards offer introductory 0% APR periods that allow business owners to finance a substantial purchase and pay it off within a certain number of months without interest. This means you can carry your balances from one billing cycle to another, interest-free. These 0% APR offers apply to purchases or balance transfers―some cards come with interest-free financing offers for both―and can last for up to 18 months.
Business owners needing to make a large purchase may benefit from business credit cards with 0% APR offers. Also, those wanting to consolidate existing debts from other credit cards can take advantage of the best business credit cards for balance transfers, which are best for paying off debts from other high-interest cards. Make sure you repay your balances before the introductory period ends to avoid being charged with the regular APR.
4. Spend Less Than 30% of Your Credit Limit
High-limit business credit cards are great for businesses with substantial expenses each month. It’s important to carefully monitor your monthly spending to ensure you only spend less than 30% of your credit limit. Doing so will not only keep your statement manageable but also help improve your credit score by maintaining a low credit utilization ratio.
Credit utilization ratio: The amount of credit you’re using compared to your total available credit limit, which can be calculated per card or for all the cards your business owns. To improve your credit score, a good credit utilization ratio that ranges from 0% to 30% is recommended.
5. Take Advantage of Credit Card Rewards
One of the advantages of business credit cards is that they offer rewards that can be useful for your business. Make sure to choose a card that offers the type of rewards you prefer to earn. Also, don’t forget to take advantage of sign-up bonuses if you have necessary expenses that can meet the spending requirements.
Rewards can come in the form of cash back as a statement credit or cash deposit, points that can be redeemed as merchandise, and travel rewards that can be used for flights and hotel stays. For options, see our best cash back cards and leading cards for miles.
To maximize your rewards, it’s crucial to choose a card that offers rewards on expense categories that align with your business’s spending habits. For example, if you have substantial spending on gas, choose one of the top-ranking business fuel credit cards. However, if your expenses vary across several categories, it’s best to choose a card that pays fixed-rate rewards on all expense categories.
6. Find a Business Credit Card With Few Fees
One of the best tips for using business credit cards is to find a card with fewer fees to help minimize your overall credit costs. For example, business credit cards with no annual fees give you access to financing while earning rewards on your purchases.
Similarly, if your business requires you to travel abroad regularly, you can take advantage of business credit cards with no foreign transaction fees so that you can use them to make purchases outside the country without the extra cost. For frequent travelers, you can also take advantage of other benefits these cards may offer, including ongoing rewards and free checked baggage.
Most business credit cards typically come with the following fees:
- Annual: from $0 to $695-plus
- Balance transfer: From $5
- Cash advance: From $5
- Foreign transaction: From 2.7% of the transaction amount
- Late payment: Up to $40
- Return payment: Up to $40
- Overlimit: Varies per card
- Return check: Varies per card
7. Stay Away From Cash Advances
Although most business credit cards allow you to request a cash advance or withdraw cash from an ATM, cash advances are much more expensive than a typical card purchase. Typically, their fees start at $5 or a certain percentage of the transaction amount, whichever is higher.
Plus, compared to the regular purchase APR, which is at an average of 20.63%, they often come with higher APRs. The cash advance APR varies per card but could go as high as 29.99% or more. This is applied to your transaction immediately—regardless of whether you will pay the advance right away or carry it over to the next billing cycle.
Unless you need cash quickly to cover a business emergency, using your credit card to withdraw money is not a good habit. They’re so expensive that you’d rather not utilize this feature of a business credit card.
This is a sample computation for the cost of cash advance using the following details:
- Cash advance fee: $10
- Cash advance APR: 29.99%
If you withdraw $100, you’ll be charged an APR equivalent to $29.99 right away, plus a flat-rate fee of $10. This means you’ll owe $139.99 on your bill for an original withdrawal of $100. This cost will vary depending on the amount of your withdrawal, and it could quickly add up if you use this feature frequently.
8. Monitor Your Business Expenditures Regularly
Most business credit cards come with online reporting tools that allow you to access and monitor your account anytime, anywhere. These tools can help you keep track of your expenses, analyze your spending habits, and determine whether or not you stay within budget.
In addition, it’s best to activate credit card alerts so that you will be notified whenever a certain transaction is made. For example, you can set up alerts for transactions amounting to $1,000 or more. Most issuers also send alerts for suspicious activities—and you need to take immediate action when you receive such alerts. If a transaction is confirmed fraudulent, the issuer will reverse the charge and report the fraud.
9. Create a Credit Card Policy & Set Employee Limits
If you decide to issue employee credit cards, you should set certain restrictions to prevent misuse. Create a company credit card policy agreement that contains all the terms and conditions of using employee cards, including credit limits, allowed transactions, liability, and reporting requirements.
Check out our guides on how employee credit cards work and how to create a company credit card policy agreement for more information and guidance.
It’s important to monitor your employees’ spending habits to ensure that they are using their cards only for approved transactions. Strict monitoring can help you manage your finances thoroughly and make tax season much easier.
10. Report a Lost or Missing Credit Card Immediately
As a business credit card owner, you can be at risk of fraud when you lose or misplace your credit card. There were more than 441,000 reports of credit card fraud in 2022. It’s crucial to report a lost or missing card to your provider right away.
The good news is that most issuers make this process simple by letting you lock or replace a lost card through their mobile apps. Also, most issuers provide access to 24/7 customer service where you can report a lost, missing, or stolen credit card. Be sure to call your bank directly to avoid any risks of credit card fraud.
11. Take Advantage of Tax Deductions
Most business-related expenses are tax-deductible, including interest paid on business credit cards, so make sure to take advantage of these deductions to save on taxes. You can deduct interest expenses on business-related purchases that are paid in the same tax year, so be sure to keep all receipts and relevant credit card statements to make your tax filing process smoother.
12. Know That You May Need to Provide a Personal Guarantee
To qualify for a business credit card, most credit card issuers will typically require a personal guarantee from the business owners. A personal guarantee acts as protection for the issuer so that in case your business is unable to pay its debts, the issuer can go after you and your personal assets. To prevent this from happening, you have to spend responsibly, make consistent on-time payments, and manage your employee spending.
If you want to keep your business and personal expenses and assets totally separate, you may opt to apply for a business card that doesn’t require a personal guarantee. However, there are only a few business cards without personal guarantee and most of them are charge cards, which need to be paid in full each month.
Did you know? Most business credit card issuers report your transactions and payment history to the major consumer credit bureaus, helping you build or improve your personal credit with consistent on-time payments. If you don’t want your business transactions to have any impact on your personal credit score, consider one of the top business credit cards that don’t report to personal credit bureaus.
Bottom Line
Business credit cards are useful if you know when to use cards to fund your small business. Our business credit card tips can help you unlock your card’s full benefits, avoid common credit card mistakes, and allow you to take advantage of quick and easily accessible financing. If you use your cards responsibly, you can expect to improve or build your credit score, receive higher credit limits, and establish a business credit history that can help you qualify for other business financing options in the future.
Check out our guide to the best small business credit cards for our recommendations.
