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7 Reasons Every Startup Needs a Business Credit Card

Meredith Wood

Head of Content and Editor-in-Chief at Fundera
Meredith Wood is the head of content and editor-in-chief at Fundera, an online marketplace for small business financial solutions such as loans, credit cards and bank accounts. Prior to Fundera, Meredith was the CCO at Funding Gates. Specializing in financial advice for small business owners, Meredith is a current and past contributor to Yahoo!, Amex OPEN Forum, Fox Business, SCORE, AllBusiness and more.

A business credit card is one of the most important financial tools in any startup’s toolbox. It’s way more than just a personal credit card that you use for business dealings—it’s a unique, flexible form of financing that also delivers rewards and perks specific to what’s important to you and your business.

If you’re starting a new business, don’t wait until you’re well-established to start using a business credit card. Get going right away, because as the following eight reasons will explain, the benefits of doing so are immediate, and will set you up for success down the line.


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Separate business and personal spending

When you start your business, you’ll need to make purchases. You’ve already got a personal credit card—why not just put these expenses on there and rack up the points?

Because, for several reasons, you’ll want to separate your business and personal spending from the get-go.

Logistically, separate business expenses make it easier to track what you spend on your business (rather than every transaction getting mixed in with your charges for movie tickets and dog food, or whatever else you buy in your personal life). Come tax season, you (or your bookkeeper) will be thankful that you didn’t co-mingle every business and personal transaction onto a single account.

Additionally, there are legal implications to not separating your expenses. If your business is an LLC, partnership, S-Corp or C-Corp, you won’t enjoy any of the legal or liability protections to your personal assets if your finances aren’t actually divided. That means you could be personally liable for any lawsuits that call for damages against your business.



Help build business credit

While the above reasons may have already convinced you to get a business credit card, it’s true that you can also avoid headaches and protect your assets by opening up a business checking account. So what makes getting a business credit card, in particular, a good idea for startups?

For one, it helps build up your business credit score. A business credit score is an entirely different metric than a personal score, based on different factors—such as how responsibly you use a business credit card. By building up your business credit, you create more affordable financial possibilities for your business in the future, from negotiating with vendors to obtaining more affordable terms on a long-term business loan.

Some business credit card companies also report business activity to personal credit bureaus, which means you can improve your personal credit, as well. Conversely, you may also damage your personal credit if you aren’t careful.

Provide higher credit limits

Because credit card companies recognize that a business will probably spend more than an individual does, business credit cards typically have a higher spending limit than personal ones. That means you likely won’t have to max out several credit cards to make all of your business purchases—which is bad for your credit utilization ratio.

Speaking of your credit utilization ratio, a higher credit limit means a lower ratio, which also helps improve your overall credit score.

Provide a financial safety net in case of emergency

Startups constantly have to battle to balance their cash flow, as inconsistent revenue is coupled with unexpected purchases. Startup costs are so variable, you can’t always depend on a lump sum of savings to cover them.

Enter your business credit card, which can be used to cover surprise expenses, while giving you time to move funds around to pay them off by your next payment period. Only a business line of credit—which can be harder for startup businesses to qualify for—is as useful in a financial pinch.

Works as a source of low-cost financing

In many ways, a credit card is similar to more traditional forms of “business financing,” such as a business loan or line of credit. You are essentially borrowing money now in order to pay it back later, sometimes with interest.

Some credit cards, however, can essentially act as low-cost (or even free) financing, thanks to introductory periods with a 0 percent APR. Not every credit card offers this, but if you qualify for one, you essentially get a small loan with no interest payments for the life of the offer.


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Extend lucrative rewards and perks

A business credit card, similar to a personal credit card, also offers users a number of rewards and perks that can either offset some of the cost of your purchases, or make running a business more enjoyable thanks to upgrades and benefits.

Every business credit card is different, but many give you points or cash back on most purchases. Some will either specialize in certain categories (i.e. airfare, office supplies, social media) that give you point multipliers, while others allow you to pick and choose which categories give you the most points back (and thus the most bang for your buck).

Business credit cards can also provide cell phone insurance, car rental and travel insurance, subscriptions and discounts on business tools like G Suite and Salesforce, and other travel perks like airport lounge access and seat upgrades.

Essentially, every time you make a purchase with a business credit card, your business gets a little discount, and that discount may turn into a sizeable one if you use it effectively.

Key takeaways

As an entrepreneur, your financial options are limited. You might have your personal savings, some investment from your inner circle, or perhaps a small business startup loan. Owning a business credit card gives you another layer of financial flexibility, while simultaneously building up your financial resume and acumen for the future. Couple all this with some valuable rewards and perks, and it’s easy to see why every startup needs a business credit card.

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