What Is a Business Credit Card and How Does It Work?

Business credit cards are a type of credit card designed for businesses owners. These credit cards generally work like personal credit cards, but they’re designed to help business owners pay for expenses while keeping business and personal finances separate. They may have features and rewards programs geared toward businesses.

Let’s look at what business credit cards are, how they work and how to know if they’re right for you.

What is a business credit card?

Like a personal credit card, business credit cards let you borrow money, up to a certain limit, to make purchases. You agree to pay this money back later through monthly payments.

These credit cards are designed to support business owners through features like higher credit limits and rewards programs designed for business purchases. Used responsibly, business credit cards can also help you build business credit.

Business credit card vs. personal credit card

Business credit cards generally work similarly to personal credit cards. However, there are several key differences:

• Credit limit: Business credit cards tend to have higher credit limits than personal credit cards
• Personal guarantee: Some business credit cards require a personal guarantee to qualify. This means you are responsible for paying off the card, even if the business shutters.
• CARD Act protections: The CARD Act limits credit card interest rates and charges. Personal credit cards fall under the CARD Act, while business credit cards don’t. However, issuers may voluntarily follow those requirements.
• Features and benefits: Business credit cards may offer rewards programs tailored toward business expenses. For example, you may earn more points on office supplies or technology purchases. Personal credit cards’ rewards programs may be more tailored to personal spending, so you may be able to earn more points in categories like groceries or entertainment. Business cards may also offer features geared toward business owners’ needs, like employee cards and expense tracking.

Who can qualify for a business credit card?

In general, you'll need to own a business to qualify for a business credit card. That said, a wide array of business owners can fall under that umbrella, including:

• Freelancers
• Gig workers
• Self-employed individuals (including LLCs and sole proprietorships)

You don’t need an office full of employees to qualify for a business credit card – you're eligible to apply even if your business is only a small side gig. You just have to meet the card’s requirements, which can vary.

How do business credit cards work?

You can use business credit cards for purchases up to the credit limit, like regular credit cards. Once your billing cycle ends, you must make the minimum payment by your payment due date. Paying off the full statement balance may help you avoid interest charges. Business credit cards can also offer benefits like rewards programs.

Many business credit cards let you request employee cards. This is similar to adding an authorized user on a personal credit card and may come with a fee.

Can you use a business credit card for personal expenses?

Typically, you can only use business credit cards for business expenses. These cards are designed to help business owners separate their personal and business expenses.

Who should consider a business credit card?

Business credit cards can be useful tools for business owners who want ongoing access to a line of credit and perks like employee cards. They can also make sense if you want a way to keep your business and personal expenses separate.

Personal credit cards may be a better fit for those who don’t need access to the higher credit limits or other perks offered by business credit cards. A personal credit card may also make sense if you tend to carry a balance and want to avoid the potentially higher APRs business credit cards may have.

If you decide a business credit card is right for you, here are several factors that can help you choose a card:

Applicant and business requirements

Business credit card requirements can vary by card. Researching the requirements for different credit cards can help you find one that matches your credit background and business needs.

APR

If you carry a balance, you'll likely have to pay interest on it. Business credit card APRs can be higher than personal credit card APRs, though a high credit score may help you qualify for lower rates.

Fees

Credit cards can come with fees – from annual fees to late fees. Understanding a card’s fee structure can help you find a card that makes sense for you. If you’re considering a business card with an annual fee, decide whether the card’s benefits are worth the cost.

Features and rewards

Some features may be more valuable to your business than others. For example, if you are self-employed and travel frequently for work, the ability to request employee cards might not be a priority for you, but earning airline miles on eligible purchases may be. Aligning the features with how your business functions can help maximize a card’s benefits.

Disclosure: This article is for educational purposes. It is not intended to provide legal, investment, or financial advice and is not a substitute for professional advice. It does not indicate the availability of any Citi product or service. For advice about your specific circumstances, you should consult a qualified professional.