Should I have a business credit card?

Mark WagnerFinancial Tips

Short answer:  Yes.

Long answer:  Yes, for these reasons.

  1. It’s easier. If you have a business credit card and – here’s the key – don’t use it for personal expenses, then you know that everything on that credit card statement is a deductible expense.  You don’t have to go back and decide what was business and what was personal.  Do you really remember what you purchased at Walmart on that day last month? 
  2. It builds business credit. Your business can have good or bad credit just like you can personally have good or bad credit.  Having a card in the name of the business and using the business tax ID number can help build a positive credit history for your business. Positive credit history helps if you ever need to get a bank loan, purchase a vehicle or otherwise need credit for the business.  Using your personal card for business expenses does not.
  3. Rewards.  Many business cards offer cash back or other rewards on common business purchases.  These rewards can add up!  Some offer cash back and/or travel benefits, which can help your business be more profitable.
  4. Not listed on your personal credit report. Cards issued to the taxpayer ID number of the business are not tied to your personal credit.  If you carry large balances or have high utilization on the business card, this can help improve your personal credit score.
  5. Comingling. This is a big one.  Many small businesses are formed as an LLC (Limited Liability Company) in order to protect the personal assets of the owners.  Comingling business and personal activity in a credit or bank account blurs the line on this protection.  Once this happens, a court could hold you personally liable for business debts.

I get it.  It’s easy to open a personal credit account, and it’s easy to just whip out any card in your wallet for a purchase.  It’s even easy to only use that one card for business expenses. 

But if you are serious about building and running your business well, you should consider the benefits of using a separate business credit card account.