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

Key insights:

• Business credit cards can help separate business and personal expenses while offering features tailored to business spending
• Business credit cards generally work like personal credit cards but may include higher credit limits, different protections and rewards aligned with business purchases
• Many types of business owners, including freelancers, gig workers and small business owners, may qualify

Business credit cards are a type of credit card designed for business owners. They 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 business spending.

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 then repay this money later through monthly payments.

Business credit cards are designed to support business owners through features like higher credit limits and rewards programs designed for business purchases. Used responsibly, these 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. They may also offer features such as employee cards and expense tracking. 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. 

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)
• Small and large business owners

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 approved credit limit, like regular credit cards. Once your billing cycle ends, you must make the minimum payment by your 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.

Business credit card rewards

Some business credit cards may allow you to earn rewards based on your spending.

• Cash back cards: Earn cash back on your purchases, which can offset your monthly statement balance.
• Points cards: You can earn points that might be redeemed for gift cards, merchandise or statement credits.
  
• Travel cards: If you travel frequently for work, you might prefer a card that earns airline miles. For example, the Citi^® / AAdvantage Business^™ World Elite Mastercard^® allows you to earn AAdvantage^® miles on eligible purchases, which you can use for flights, seat upgrades and car rentals.

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, perks like employee cards and a way to keep business and personal expenses separate.

Personal credit cards may be a better fit for those who don’t need access to 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 factors that can help you compare cards:

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, such as annual and 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.