A new business can get a credit card, but it will generally be somewhat restricted. The best place to get a new business credit card is the bank with which you already do business.

A good place to start looking for a business credit card is the credit card chaser.

If you prefer to look elsewhere, shop for a credit card that offers the terms and benefits you seek. Business credit cards are generally geared toward corporations. If you are doing business as a sole proprietor, there may be little or no difference between a business credit card and a personal credit card.

Can I use the credit of my new business for a credit card?

Generally speaking, not at first. A true business credit card tracks your business credit. If your business is new, with no track record, the credit card company will still base its credit rating on your personal credit. It takes two or three years for a business to establish its own credit. Once the credit of the business is established, the credit card company may relieve you of personal liability.

How does the new Credit Card Act affect business credit cards?

Business credit cards are not included in the provisions of the new act. The relief offered for personal credit cards does not apply to business credit cards. Some issuers have adopted the new rules for business cards while others have not. Ask questions before signing up for a business card. See the Consumerist website for the details.

How much credit can I get with a business credit card?

This largely depends on your personal credit score. If your business is new, the amount you can borrow personally will be the basis for the credit card limit. If your credit rating is poor, the credit card company may require security. This means that you may have to deposit an amount in cash that will be the initial credit limit.

How does that benefit me?

If you make your payments on time and otherwise keep the credit rating of your business in good standing, you will eventually establish its credit rating. At that point, you probably will be able to use the credit card on an unsecured basis.

What interest rate will I pay?

If you do not carry a balance, but pay your charges on time every month, you will pay no interest. If you carry a balance, expect to pay as much as 20% annual interest on the unpaid balance. In addition, if you are late in making payment, you will incur penalty charges. Because business credit cards are not covered by the new act, companies can raise interest rates at will, without notice.

What about zero percent credit cards?

Many credit card companies offer so-called “teaser” or introductory credit card rates. If you intend to pay your charges monthly, these rates offer no incentive. If you intend to keep a balance, these rates last for a limited time, usually six months. After that, they jump up, usually into the 20% range. For a new business, the interest rate is dependent on your personal credit rating.

Are there annual fees?

Most credit card companies do not charge annual fees. Several do, with annual rates ranging from about $60 to $450. Whether the annual fee is worth paying depends on other benefits you can derive from the card.

What about rewards?

Most credit cards offer some sort of reward. These range from accumulated points for travel and merchandise, to discounts at restaurants and hotels to cash back on purchases to low interest rates on purchases or balance transfers to anything else the company can think of as an incentive. It pays to shop for those rewards on credit cards that you will find most useful.

Should I use my credit card for financing my business?

Only if you are desperate. With the high interest rates, you would probably better off borrowing from a bank and paying your credit card balance each month. You should view your business credit card as a convenience, not as a source for borrowing. You should also see it as a means of establishing a good credit rating for your business, and making monthly payments on time does much to accomplish this.

What about record keeping?

The IRS requires that all businesses keep adequate books and records. Among the records cited are
credit card receipts. Since the business will be using the credit card for all sorts of purchases and expenses, particularly travel and entertainment, keeping credit card receipts and statements provides an easy way to avoid IRS difficulties.

Before you apply for a business credit card, compare other online credit cards with our credit card finder above!

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