Credit cards play an important role in funding startup businesses, providing flexible capital during growth phases, and acting as reliable financing for established businesses. This is because credit cards offer comparatively low rates and also offer cash back and rewards points. Credit card funding is best for businesses who need $50k or less in revolving credit.
American Express Blue Business Plus is our top recommended 0% small business credit card. The card offers 15 months of 0% interest on purchases and balance transfers. It also has ongoing rewards points between 1x – 2x on all purchases.
Best Credit Cards to Fund Your Small Business
The best credit cards to fund your small business are cards that offer long introductory periods of 0% APR for purchases and balance transfers. Zero percent credit cards will also often offer cash back or rewards points on purchases, which act as a “discount” on the amount you finance. Rewards are earned when statements are paid.
Here are the best 3 business credit cards to fund your small business:
1. American Express Blue Business Plus
2. Chase Ink Cash
3. Capital One Spark Cash Select
When to Consider a Credit Card to Fund Your Small Business
Consider a credit card to fund your business is if you’re a startup company, in a phase of high growth, or a mature business. Startups will typically use credit cards to float startup expenses. Growth companies usually rely on them to cover inventory and employee purchases and mature companies often keep a credit line open just in case.
When you rely on a business credit card for financing, you receive benefits that many business loans don’t provide, such as introductory bonuses, ongoing rewards, revolving credit, and 0% interest. Business owners know that these opportunities help provide flexible access to capital at a lower total cost than almost all other options besides bank loans and similar types of debt.
For this reason, business owners that use a credit card to fund a small business typically do so because they haven’t been in business long enough to qualify for a bank loan and/or who don’t have collateral. Still, business owners with good credit and long-standing businesses will also use a credit card because of the faster access to capital when compared to something like an SBA loan.
For example, the average APR for credit cards is around 16%. Popular online lenders, such as OnDeck and Kabbage, charge APRs that are 3 to 6 times more expensive. However, these lenders have their advantages. Online lenders still offer loans to business owners with minimum credit scores around 500 for their bad credit business loans and large sums of money up to $500k or more.
With credit card financing, your credit line is limited and you typically need a credit score above 660 to qualify for the good cards. Using a business credit card to fund your business is therefore best for business owners who have good credit and who need to make smaller purchases. Still, there are prepaid credit cards, secured credit cards, and personal credit cards for business owners that might work for those who don’t qualify for the better small business credit cards.
Benefits of Using a Credit Card to Fund Your Business
There are many benefits of using a credit card to fund your business. The most immediate benefit is a 0% introductory APR period that gives small business owners time to grow their companies. However, there are many other benefits, which include overall cost savings, flexibility, balance transfers, rewards and bonuses and more.
Below is a list of the top benefits of using a credit card to fund your business:
1. Lower Cost of Capital
Credit cards have low interest rates when compared to other types of small business financing options. Small business credit cards typically have ongoing interest rates that range from 12% – 24% annually. For example, this is lower to the 30% – 50%+ APR you see with small business lines of credit vs small business credit cards.
Small business credit cards will often charge a fee for such things as cash advances, balance transfers, and more. Still, you can easily avoid these additional fees with proper planning. This makes a credit card a more inexpensive and viable alternative to all small business financing options except for traditional bank, SBA, and a few hard money loans for prime borrowers.
However, remember that interest rates on credit cards are variable and can increase over time. Still, rates continue to hold steady and they remain a good startup funding option. Below is a list of credit card interest rates and how they compare to other financing options.
Cost of Credit Card Rates vs. Alternatives
|SBA Loans||4% - 9%+|
|Commercial Real Estate Loans||4% - 12%+|
|Traditional Bank Loans||4% - 15%+|
|Personal Credit Cards||12% - 24%+|
|Small Business Credit Cards||12% - 24%+|
|Small Business Lines of Credit||30% - 50%+|
|Online Business Loans||30% - 50%+|
|PayPal Working Capital||30% - 60%+ |
|Invoice Financing||30% - 60%+|
|Merchant Cash Advances (MCA)||80% - 120%+|
2. 0% Introductory APR Periods
0% introductory APR is a 6 – 18 month period where there is no interest charged on purchases and sometimes balance transfers. 0% intro periods are important for small business owners because it gives them time to grow before they have to pay their expenses. In this way, a small business credit card works like a flexible startup business loan.
It’s fairly common to find small business credit cards with 0% intro APR periods for the first 9 – 15 months you have the card. This gives you the opportunity to make company purchases and/or transfer existing credit card balances without having to make interest payments for the entire intro period. However, since a credit card is revolving, you won’t be able to spend more than the limit until you start making payments.
There are also personal credit card options that might offer longer 0% introductory APR periods. You can read our buyer’s guide on the best personal credit cards for business owners for more information. Remember that if you use a personal credit card for business expenses you’ll still want to separate your business and personal expenses whenever possible.
3. No Introductory Balance Transfer Fees
In addition to 0% intro APR periods, small business credit cards will also offer no fees on balance transfers for the introductory period. This means that you can transfer the balance of an existing credit card that’s being charged interest to a 0% interest card at no cost.
4. Sign-Up Bonuses and Ongoing Rewards
Almost all small business credit cards offer sign-up bonuses and ongoing cash back or rewards points. Cards that offer cash back rewards typically offer a $200 – $300 intro sign-up bonus if you spend more than a certain limit within a specified timeframe. Then, the cash back reward card will offer ongoing cashback between 1% – 5%.
Cards that offer rewards points usually offer 25k – 50k+ sign-up points if you spend a certain amount within a certain timeframe. Once the intro period is over, the cards will offer rewards points between 1x – 5x on purchases. Points can be redeemed for travel rewards and sometimes even cash.
Chase Ink Cash is our top recommendation for a cash back small business credit card. It offers a $300 introductory bonus if you spend $3k in your first 3 months and ongoing cash back between 1% – 5%. American Express Blue Business Plus is our top recommendation for a rewards points card. It offers 2x points for the first $50k spent on the card and 1x points on all purchases after.
How to Use a Credit Card to Fund Your Business
It’s important that if you use a credit card to fund your business that you follow specific best practices. This will help you better manage your cash flow and your working capital expenditures and will ensure you have enough money to repay your credit card bills over time. The result is a financially healthy company.
Below is a list of the 5 steps needed to use a credit card to fund your business:
1. Treat Your Credit Card Like a Loan
When you use a credit card, only minimum payments are required and there’s often a 0% intro APR period, making it tempting to let your balances pile up. This differs from a traditional small business loan where you’re obligated to repay with regular installments of principal plus interest.
Even with 0% intro APR, it’s important to treat credit card financing as a loan and make regular payments to keep your balance in check. Otherwise, you will significantly increase your interest burden and the amount of money you owe. You could also end up hurting your personal credit score.
One rule of thumb is to analyze your business budget and figure out how much you’ll be able to pay back before you get your first credit card statement. Once you start getting charged interest, Bankrate.com suggests you pay at least double or triple the minimum monthly payment in order to shield your credit score and shrink the final amount that you’ll owe.
When you apply for small business credit card, only use it for essential business purchases. If possible, try and keep your balance at or below 30% of your credit limit. If your balances are approaching your credit limit, it can be a bad sign to creditors and it might hurt your credit score. If you must keep a balance that’s greater than 30% of your credit limit, you’ll need to pay more than double or triple the minimum payment to keep up.
2. Take Advantage of Balance Transfers
Roughly 50% of all small businesses have credit card debt. Balance transfers let you consolidate small business debt and transfer all your balances over to one low-interest or 0% intro APR card. This can help you save money on interest and gives you more flexibility when making repayments on your outstanding balances.
This is especially beneficial when you have a 0% introductory APR small business credit card. Typically, these cards won’t charge any interest on balance transfers as well as not charge balance transfer fees during the intro period. This gives you the chance to transfer interest-bearing balances to cards that don’t charge interest.
There are a few caveats for business owners seeking to do a balance transfer. First, if your card charges a balance transfer fee, make sure that it isn’t too high. Second, make sure your credit limit is high enough to accommodate the full balance transfer. Third, don’t transfer balances from a personal card onto a business card if you want to keep your expenses separate.
American Express Blue Business Plus offers a long 0% introductory period for purchases and balance transfers at 15 months. Ongoing rates range from 12.24% – 20.24% depending on the business owner’s personal credit. The card offers 2x points on the first $50k spent and 1x points on all purchases after. Points are redeemable for cash or travel rewards.
3. Make Sure You Can Afford Annual Fees
There are many small business credit cards that don’t charge annual fees. The American Express Blue Business Plus, Chase Ink Cash, and Capital One Spark Cash Select all don’t have annual fees. This helps startup companies and early-stage entrepreneurs avoid any extra costs, especially helpful during 0% introductory periods when they’re probably already floating expenses.
However, there are some business credit cards that charge annual fees as high as $450+. These cards will typically offer more robust introductory offers and ongoing cash back and rewards programs, helping the card pay for itself and more. Business credit cards with a fee are typically used by more mature companies that can afford it and put the rewards to good use.
4. Discuss Credit Card Usage with Partners
It’s common for business owners to get credit cards in their name and let others use it. If you have business partners or employees, it’s important to be upfront about the expected credit card usage. We recommend that you consult an attorney, but at the very least you should have a signed, written corporate credit card policy agreement that clarifies the following:
- The portion of your business budget that will go towards paying off the credit card bill each month
- The amount you and your business partner(s) have to cover if the business can’t afford to pay a credit card bill
- Statement outlining that all business partners are liable for card usage, regardless of which business owner’s name is on the corporate credit card account
Agreeing on these things before you use a credit card for business expenses will save you time, money, and headaches later.
5. Use Specific Cards for Specific Expenses
Small business credit cards are typically made to work well for a specific purpose. For example, a cash back rewards card might offer higher cash back rewards for office-related purchases. A rewards point card might incentivize with 2x miles that are redeemable for travel expenses. You’ll want to use each of these cards to it maximizes its cash back and rewards.
Other cards like fuel cards and fleet cards offer rewards that are specific to gas and gas-related purchases. However, the best credit card to fund your business is one that offers a long intro period of 0% APR on purchases and balance transfers. It’s important to use one of these cards before looking at the specific rewards of individual cards.
How to Maximize Your Credit Line
If you decide to use a credit card to fund your business you’ll be limited by your credit line. Although a personal credit score is the primary factor in determining your credit limit, there are certain things you can do to maximize the size of your credit line.
For example, if you make consistent and on-time credit card payments your credit card provider might increase our credit line at least once a year. If your credit card company doesn’t increase your credit limit within 5 – 6 months of opening your account, call or email them. If you have a history of on-time payments, the issuer will usually increase your credit line to retain you as a customer.
Some small business credit card providers will also sometimes consider your business credit score. This is because unlike personal credit, they don’t need permission to see your business credit report. Credit card companies will use business credit reports like the D&B credit report as a qualitative assessment of your creditworthiness. Better business credit can result in a higher line of credit.
However, the most important thing you can do is work on increasing your personal credit score. Avoid hard credit pulls and make sure you pay all your bills on-time. Also, ensure that you keep your credit utilization ratio below 30%.
Keep in mind that just because you have a higher credit line doesn’t mean you have to use it. In fact, having a higher credit limit without using it decreases your credit utilization ratio and increases your total debt limit, both of which can have a positive impact on your credit score.
Small Business Credit Cards vs. Personal Credit Cards
There are typically two types of credit cards that include both personal and business cards. If you have a new business, it might make sense to use a dedicated personal credit card for business costs that keep your expenses separate. As your business matures, it then may be time to invest in a business credit card.
Consumer credit cards offer longer 0 % APR intro periods up to 21 months, compared to 9-12 months with business cards. This is helpful for a new business that’s just getting off the ground and needs to save as much money as possible. Consumer credit cards are also subject to the National Credit Card Accountability Responsibility and Disclosure (CARD) Act, which protects cardholders from sudden increases in interest rates and fees.
Business credit cards also come with several advantages. They typically offer higher credit lines and are a natural choice as your business outgrows the limit on personal credit cards. Business cards can also shield your personal credit score and help build up your business credit score. Lastly, you can only charge business expenses to a business credit card, forcing you to separate your business and personal expenses.
The best time to use a credit card to fund your business is when you need capital with a 0% introductory period or when you want access to a flexible credit line. Startup companies, high growth organizations, and more mature businesses all typically use a credit card to fund themselves at one point or another.
American Express Blue Business Plus is our top recommended 0% business credit card to fund your small business. The card offers 15 months of 0% interest on purchases and balance transfers. It also has ongoing rewards points between 1x – 2x on all purchases.