Business Credit Cards: Pros and Cons

Updated Oct 30, 2024
Fact checked by
Marie-Ève Leclerc
Marie-Ève Leclerc

Marie-Ève Leclerc

Marie-Ève Leclerc
Marie-Ève, Web Director at Milesopedia, is an expert in budget travel and a slow travel enthusiast. Specializing in Aeroplan, Scene+, and Marriott Bonvoy programs, she spends nearly six months a year abroad, making travel her way of life. Constantly seeking the best waves to surf, excellent coffee, and strategies to extend her travels, she is often found in coworking spaces with fellow digital nomads or by the sea, watching the sunset.
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Carte de crédit pour entreprise avantages et inconvénients
To the point Before you apply for a business credit card, it's a good idea to look at the pros and cons so you can make the right choice.

There are many advantages to using a business credit card. But how do you know if the business credit card you’re interested in is the best choice for you? By exploring its advantages and disadvantages. Discover insights, tips, and more on the subject in this article.

The Benefits of a Business Credit Card

Whether you’re self-employed or the owner of a sole proprietorship such as an SME, there are many advantages to taking out and using a business credit card. If you use it responsibly, you’ll reap significant benefits, including:

  • Better management of business expenses
  • Commercial credit history
  • Monitoring employee spending
  • Short-term cash flow flexibility
  • Rewards or cash rebates
  • Welcome offers
  • Simplified tax filing with a business credit card
  • Fraud protection

Here’s more information on each of these benefits.

Better Management of Business Expenses

A business credit card lets you record your business expenses efficiently. Regardless of your financial institution, you can access your spending picture at your fingertips. This lets you monitor things in real-time or create reports based on specific criteria.

For example, detailed quarterly statements allow you to break down your business expenses into specific categories. What’s more, some of the best business credit cards allow you to integrate your credit account with applications and software such as QuickBooks or Sage50.

Commercial Credit History

Good commercial credit offers a number of advantages, whatever the size or status of your business. First and foremost, a favourable trade credit means you’ll benefit from more straightforward, faster borrowing procedures. It also gives you access to a higher range of business financing.

Your business credit is also a valuable tool for accessing better repayment options with your suppliers and lenders. The golden rules:

  • Make your payments on time
  • Maintain a low utilization ratio

The latter corresponds to the credit rate used on the total available credit. Ideally, it should remain below 30%.

Monitoring Employee Spending

Having a business credit card gives you the opportunity to obtain credit cards for your employees. In this way, they can proceed with their expenses without giving you a receipt, submitting claims for reimbursement, etc.

The BMO World Elite Business Mastercard, for example, allows you to obtain additional cards for just $50 each.

With detailed statements for all cards issued, you can monitor spending at any time. This way, your team buys on behalf of your company and helps you earn reward points faster.

Short-Term Cash Flow Flexibility

“Short-term” is important here. Having access to a source of capital at all times allows your company to remain flexible in the event of unforeseen circumstances. However, a business credit card should never be used to cover your long-term cash flow needs. This could damage your business credit in many ways.

Rewards or Cash Rebates

Depending on the type of card, you can earn reward points or cash rebates. Some loyalty programs even reward you faster when you spend in certain bonus categories. These include gasoline, office supplies, restaurant expenses, and more. You can then use these reward points on your business travel plane tickets, gift cards to pay for business expenses, etc.

Welcome Offers

Depending on the credit card you select, you may receive a welcome offer. Often, these welcome offers take the form of rewards points and cash back. Sometimes, however, they take the form of a first year with no annual fee, or promotions on balance transfers or cash advances. However, check the conditions and restrictions that may apply.

Consult the following articles to find the best offers on the market today:

Simplified Tax Filing With a Business Credit Card

Separating your business expenses from your personal expenses dramatically reduces the work involved in filing your business tax return. No more digging through your personal statements to find out what you’re spending on your business! Everything is in one place, and every expense is linked to your business.

The BMO AIR MILES® World Elite Business Mastercard particularly rewards AIR MILES collectors who wish to separate their personal and business spending.

You can earn 3,000 AIR MILES Bonus Miles in your first year! In addition, there is no annual fee for the first year.

You earn 4x the Miles when you use your card at participating AIR MILES Partners. And 1 Mile for every $12 you spend everywhere else, including Costco.

With the BMO AIR MILES®† World Elite®* Business Mastercard, you benefit from various travel protections:

  • Collision Damage Waiver
  • Car Rental Personal Effects & Business Property
  • Car Rental Accidental Death & Dismemberment
  • Baggage & Personal Effects
  • Baggage insurance in case of delay
  • Flight Cancellation
  • Trip Interruption/Trip Delay
  • Flight delay
  • Common Carrier Insurance

And for your purchases:

  • Extended Warranty
  • Purchase Protection

Fraud Protection

Business credit card issuers offer a variety of fraud protection options. These include fraud protection in the event of card loss or theft, and protection against online fraud.

The Disadvantages of a Business Credit Card

As mentioned above, you benefit from using a business credit card in the right way. Here is how you can reduce the impact of inconveniences, or avoid them altogether. For example:

  • Adequate solvency required
  • Accumulation of debt
  • Impact on personal credit score
  • Business credit card interest charges

Here’s more information on each of these disadvantages.

Adequate Solvency Required

Business credit cards require better creditworthiness than personal credit cards. Moreover, most issuers only accept applications if they have an excellent or good credit record. But don’t get discouraged. Secured business credit cards will help you establish or re-establish your business credit rating.

Accumulation of Debt

Getting a business credit card is very tempting, especially when you have many business expenses as an organization. But be careful. Accumulating debt can happen faster than you think. Before you apply, check that your financial health and cash flow are sufficient to pay off your credit card every month.

Impact on Personal Credit Score

In general, business credit card issuers look at your personal creditworthiness when making a decision. And if they perform a thorough credit analysis, your personal credit rating may be temporarily lowered. However, once your application has been approved, most issuers do not report business credit card activity to the credit bureaus.

Business Credit Card Interest Charges

Expect to pay particularly high-interest charges if balances are not paid in full. Consider the Business Platinum Card® from American Express, which allows you to maximize your cash flow with up to 55 days of interest-free credit. It’s especially useful for major purchases such as renovations.

The Best Credit Cards for Businesses and SMEs

The best choice of credit card for your business depends on a number of factors. In particular, the size of your company and your business spending habits. Here are the business credit cards we often recommend:

Apply for a Business Credit Card Online

Generally speaking, it’s easy enough to get a credit card for your business. But the process does take into account your creditworthiness and the financial health of your business. Some cards require a good to excellent credit score for approval.

That said, once you’ve found the right business credit card on our credit card comparator, click on the “Apply” button. Then follow the steps on the financial institution’s website to complete your online business credit card application.

Bottom Line

In short, a business credit card offers significant advantages for your business. These include effective expense management, building business credit, and monitoring employee spending. However, it’s crucial to weigh these advantages against the potential drawbacks.

By choosing the right credit card and using it wisely, you can maximize your rewards and maintain sound financial practices for your business.

Ultimately, a business credit card can be a powerful tool for financial management and growth when used responsibly. Remember to consider the specific needs of your business to make an informed decision.

Frequently Asked Questions About Business Credit Cards

What are the main advantages of a business credit card?

Key benefits include better expense management, building trade credit, and monitoring employee spending.

Does a business credit card affect my personal credit?

Yes, issuers often consider personal credit, which can temporarily impact your score.

How can a business credit card help with expense management?

It offers detailed statements and integrates with accounting software for precise expense tracking.

What are the risks of using a business credit card?

The main risks include debt accumulation and high credit requirements.

Do business credit cards offer rewards or cash back?

Yes, many cards offer reward points, cash back or miles, often with bonuses in certain spending categories.

How to choose the best business credit card for my needs?

Evaluate your spending habits, the benefits of the card and compare the different offers to find the one that best suits your business needs. Use helpful tools like our credit card comparator or our best business credit card offers page.

Is it easy to get a business credit card?

It’s usually easy to get a credit card for your business. But the process does take into account your creditworthiness and the financial health of your business. Some cards require a good to excellent credit score for approval.

Come to discuss that topic in our Facebook Group!
Milesopedia

Milesopedia

Milesopedia
Milesopedia is your ultimate guide to maximizing the benefits of rewards programs, credit cards, and budget-friendly travel. Written by a passionate team of experts in personal finance and travel, each article authored by Milesopedia reflects our commitment to providing practical advice, effective strategies, and in-depth analysis to help you save money and travel smarter. Whether you're a beginner or an expert, Milesopedia is here to support your goals and answer all your questions.
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