What is a Business Credit Card and Why Do You Need One?

You probably have a personal credit card, but did you know can get one for your business as well?

Yes, business credit cards aren’t as popular as personal credit cards, but they do exist. In fact, small business credit card spending is forecast to hit $700 billion in 2022.

As an entrepreneur who has never used this card before, it’s understandable that you might have questions like: “What is a business credit card?” “How will it benefit my business?”

In this article, we’re answering those questions. Read on!

What Is a Business Credit Card?

To help you understand what a business credit card is, we need to start by explaining what a credit card is.

As an individual, you certainly have a credit history. A bank or other financial lender can use your history to determine your creditworthiness and offer you a line of credit – a specified amount of money that you can use whenever you need and repay before the due date.

A credit card gives you access to these funds. You can use it to make payments at any point of purchase that accepts credit cards. You can also make ATM withdraws to get a cash advance.

A business credit card works similarly, only it’s designed for registered businesses, not individuals.

Why Your Enterprise Needs a Business Credit Card

Perhaps you’re thinking, “A line of credit is basically debt. Why can’t I just take out a personal or business loan whenever I need money?” Or maybe you’re not interested in taking up any business debt.

Well, here are a couple of solid ways your business will benefit.

Better Cash Flow Management

82 percent of small businesses that fail do because of poor cash flow management. A business credit card can help you solve this issue.

Let’s say you receive a huge order. Looking at your cash reserves, you realize you don’t have enough money to service the order. With a business credit card, you can tap into your line of credit and use the funds to purchase more stock.

Bear in mind that as long as you pay your credit card bill before the due date, you won’t be charged any interest. Save for the service charges or transactional fees, credit cards are a cheap source of business funds.

Build Business Credit History

Just like humans, businesses have credit histories. Credit bureaus use this history to determine your business’s score. And lenders use this score to determine the business’ creditworthiness and assign a credit limit.

If your business has a bad or poor score, a business credit card can help you build it. The more you use the card and stay on top of balance repayments, the higher your score will rise.

What’s more, there are credit cards designed for businesses with bad credit. A good example is the First Access Visa Solid Black Credit Card. Be sure to read reviews and find out more about this card to find out if it is right for you. 

A business credit card can also help you keep track of business expenses and you can earn a variety redeemable rewards.

Go Get a Business Credit Card

Now that we’ve answered the question “what is a business credit card?” and explained why you need one, the next step is for you to go on the hunt and find the best card for your business. There are thousands of cards in the market, so do thorough research before signing up for one.

Need more business finance insights? Explore our blog!