Business credit cards are similar to personal credit cards in how they’re obtained, how they’re used, and how they work. Business credit cards can serve a variety of purposes, including:
1. Serving as business startup capital
2. Serving as business travel funding
3. Serving as emergency business funding
4. Serving as social business funding (such as taking clients to a lunch meeting)
5. Serving as an image tool (business credit cards can make a business or its owner look more legitimate or “bigger” than they are)
Business credit cards are sometimes more difficult to obtain than personal credit cards (which some entrepreneurs also use for certain business expenses or startup costs), but they offer a benefit that personal credit cards don’t: business credit cards don’t revolve around, or affect, someone’s personal credit score, and instead build a credit reputation for the business itself.
Business credit cards operate in a very similar way to personal credit cards. Business cards still have an application and approval process, still include an interest rate on purchases, and still have an impact on credit scores, only of the business rather than the owner generally. This is because, rather than applying for a business credit card with a social security number, a business owner would apply under their business’ federal EIN (an identification number for businesses provided by the IRS).
While entrepreneurs have to watch their business credit card spending, just as someone would have to do with a personal credit card (because bad business credit could ruin a business), business credit cards offer an added record-keeping benefit and protections for the buyer similar to chargeback options using personal credit cards. Keeping track of expenses with business credit cards is simple by keeping and monitoring credit card statements, making them ideal for business social events or business travel, where monitoring costs manually may not be a priority or an option.
