What is a business credit card and how does it work?

Business credit cards are useful financial tools that can help you keep your business and personal expenditures separate. While they function like personal credit cards, business credit cards serve a different purpose. There are different types of business credit cards available, such as charge cards, cash back cards, no annual fee cards and more—the best option depends on your business’s unique needs.

Keep reading to understand more about business credit cards and how they may be able to support your business.

What you’ll learn:

• Business credit cards work like personal credit cards, but offer features and benefits to meet the unique needs of business owners.
• With most business credit cards, you can keep personal and business expenses separate and take advantage of typically higher credit limits.
• Some business credit cards offer additional benefits, such as free employee cards, elevated travel rewards, welcome offers, and business-grade security features.
• Whether you’re looking for travel rewards, need a flexible spending capacity, or want to earn cash back, Capital One offers a range of business card options to help power your business.

A business credit card is designed for business, rather than personal use. This financial tool may be used to separate business expenses from personal. Business credit cards typically come with features like higher credit limits, business-grade rewards, and management tools to help run your day-to-day operations.

While many corporations and registered businesses use business credit cards, they can also be obtained by anyone who earns money independently—like freelancers or sole proprietors.

Business credit cards work like personal credit cards in the sense that they offer a convenient way to make purchases. But instead of being used by individuals, business credit cards are used by business owners and entrepreneurs to make purchases on behalf of their companies.

There are various types of business credit cards, and each has different features and benefits. Here are some of the most common categories of business credit cards:

• Cash back business cards: Cash back is a type of reward that’s earned—typically as a percentage—when you make purchases with your business card. Spark Cash and Spark Cash Plus from Capital One are prime examples of cash back business cards.
• Travel rewards business cards: This type of business card offers rewards—usually in the form of miles or points—that can be redeemed for travel-related purchases. Some travel rewards business credit cards from Capital One include Venture X Business and Spark Miles.
• Business charge cards: With business charge cards, the balance must be paid in full each month. They typically have no preset spending limit, which can be beneficial if your business has higher spending needs. Venture X Business and Spark Cash Plus from Capital One are examples of business charge cards.
• No annual fee business credit cards: Certain business credit cards—like Spark Miles Select and Spark Cash Select from Capital One—offer business-grade benefits, without an annual fee.

Business credit cards offer a variety of advantages that can help you more effectively manage your business, like:

• Manage expenses conveniently: Having a credit card designated for business use can help make it easier for you to keep your business and personal expenses separate. This can be particularly helpful for tax and accounting purposes.
• Higher lines of credit: Compared to personal credit cards, business credit cards can have higher credit limits. Some business cards come without a preset spending limit, which means you can enjoy flexible purchasing power that adapts to your business.
• Employee cards: Some business credit cards allow you to  add employees to your account and monitor their spending. You can also set individual card limits and earn rewards on purchases your employees make on behalf of your business.
• Business-related features: Certain business credit cards—like any business card from Capital One—come with additional benefits, such as no foreign transaction fees, and year-end summaries to help you get business done.
• Welcome offers: Many business credit cards come with generous welcome offers. These typically come in the form of additional miles, cash back, or travel credits.

There are a few things to keep in mind before you secure a business credit card, such as:

• A personal guarantee may be required. This means the issuer may require you to sign a contractual agreement stating that you would be personally responsible for any debts the business is unable to repay.
• Some business credit cards may have higher annual fees. Many business credit cards charge an annual fee to use the card. It can be helpful to research the card’s features and benefits to determine if they outweigh the cost of the fee.

If you’ve decided a business credit card is right for you, there are a few steps to take before you’re approved. For a more comprehensive guide, check out how to apply for a business credit card, but here are the basics:

• Review various business credit card offerings: Before you start applying, determine which business credit cards best align with your business’s needs.
• Get pre-approved: One step you might take to narrow down your options is getting pre-approved. It’s a good way to determine which business credit cards you’re eligible for. Capital One offers a pre-approval tool that’s quick and easy to use—and won’t harm your credit.
• Prepare necessary documents: When you apply for a business credit card, the issuer will likely ask for things such as your personal information, business details and your EIN or Tax ID Number.

Business credit cards can help you take the next step on your business journey as you begin to separate your business and personal expenses. You can use business credit cards. They can also serve as a tool to manage your business more effectively, while potentially earning additional benefits and rewards.

There is a wide range of business credit card options available, and the right one for you depends on your business’s unique goals and needs. Compare business cards from Capital One today to see which card can best power your business.