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Travel Tuesday Top 10: Reasons to Get a Business Credit Card

by on January 29, 2013 · 21 comments

in American Express, Chase, Citi, Credit Cards, Top 10

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Update: The offer mentioned below for the Starwood Preferred Guest Business Credit Card from American Express has expired. View the current offer here.

Last week’s limited-time 75,000-point sign-up bonus offer for the Amex Business Gold Rewards card was a good reminder that many of the credit cards currently on the market that are geared towards business carry rewards and benefits that are just as great – and sometimes better – than the personal credit cards that are out there including huge sign-up bonuses, category spending bonuses, and tons of other perks. A lot of people seem hesitant to apply for them, though, so I wanted to create a #TT top ten list of great reasons why you should take advantage of business credit cards.

Note: I am not a professional financial planner or accountant, so you should consult yours before making any credit decisions and above all, be responsible and don’t bite off more than you can chew.

1. You don’t need a large business to get one. This seems to trip up a lot of people who think that you need an actual, incorporated business with its own Federal ID number in order to apply for a business credit card. While you should aim to use your business credit card for business related expenses, each credit card company has a different threshold for what information they require for someone to get a business card. Most are very flexible, but Citi is generally the toughest, often requiring proof of your business, including government EIN and business checking account information. However, many small businesses start out as simple DBAs (Doing Business As) which simply denotes a business name used by a person or entity that is different from the person’s or entity’s true name. So if you start a small Ebay business and want to keep those finances separate from your personal expenses, it would be conceivable that you’d want a business credit card. If you are starting a small company as a sole proprietorship, you can just provide your social security number when asked for EIN and usually that suffices.

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Applying for a business credit card will incur a 2-5 point hit on your personal credit score.

2. Business credit cards don’t sit on your personal score. I want to start by clarifying that you get a 2-5 point hit on your personal credit score when you apply for a business credit score since banks use it to assess your creditworthiness and these cards are still personally guaranteed. However, after you have opened a business credit card, that line of credit sits separate from your personal credit line so utilization and other factors shouldn’t affect your personal credit score. This is good if you run big balances on your business cards since it won’t artificially damage your personal credit score. Just be careful, though, since if you default on a business card, expect the issuer to come after you personally since they are guaranteed by your personal credit.

Keep your expenses separate

Keep your expenses separate with a business card vs. a personal card.

3. Keeping expenses separate. Almost all of us have that credit card or cards that we put all our business or non-personal expenses on, whether we have a business of our own or not. It’s important to keep your personal expenditures separate from your business ones – especially as tax season draws nigh – whether you’re just getting reimbursed or you are operating your own company. Having a separate business credit card makes tracking expenses easy and you’ll pay less in accounting fees if your accountant doesn’t have to sort through personal vs. business expenses (plus it’s easier to get everything straightened out if you ever get audited by the IRS). This is also a great reason for a bank or issuer to give you a personal credit card when you apply since it’s one of the major reasons people apply for business credit cards in the first place.

Update: This offer is no longer available. View the current offer for the Chase Southwest Rapid Rewards credit card here.
4. More sign-up bonuses. If you’ve already churned through most of the personal credit cards currently on the market, applying for business credit cards allows you to go for a whole new set of sign-up bonuses. Though you’ll have an inquiry on your credit, you’ll also be eligible for a sign-up bonus like the Ink Bold and Ink Plus‘s 50,000 Ultimate Rewards points, the Southwest Business Card with card has a 50,000-point sign-up bonus, the  Starwood Business Amex‘s 25,000-point bonus, or that limited-time Amex Business Gold 75k sign up.  If you already got the 50,000 American Airlines AAdvantage miles on both the personal Visa and Amex, you could always get one of their business cards like the Citi Executive / AAdvantage World Elite Mastercard or the CitiBusiness / AAdvantage World Mastercard to rack up even more miles, or the the sign-up bonus of 10,000 Medallion Qualifying Miles with first purchase Business Delta Reserve card from Amex if you need that little extra bump for elite status. Check out my list of the best business cards for earning travel points, miles and cash back. Just remember, many business cards have higher spending requirements, so know what you’re getting yourself into before you sign up.
Earn triple points on airfare with the Business Gold Rewards Card.

Earn triple points on airfare with the Business Gold Rewards Card.

5. Different bonus spending categories. Just like personal credit cards that have category spending bonuses such as the Sapphire Preferred’s 2x on travel and dining and the Amex Premier Rewards Gold’s 3x on airfare and 2x on gas and groceries, many business credit cards extend spending bonuses on certain categories of merchants, so by using your business cards on those specific categories while continuing to use your personal cards on the categories where they earn a bonus, you can maximize even more of the dollars you are spending. The Business Gold Rewards card from Amex, for instance, has the same 3/2/1 earning structures as the personal card, awarding 3x points on airfare, 2x points on purchases in the U.S. for advertising in select media, gasoline at U.S. stand-alone gas stations, and shipping and 1x points on other purchases. Restrictions: Points are earned only on eligible purchases. Bonus points limitations apply. The Chase Ink Bold and Ink Plus both offer 5 points per dollar spent on office supplies/cell phone/internet/landline/TV, 2 points per dollar on gas stations and hotels and 1 point per dollar on everything else. Restrictions: $50,000 max spent in both 5x and 2x categories. For its part, the CitiBusiness Thank You card earns 3 points per dollar spent on eligible purchases in rotating categories.
Airport lounges are a great place for frequent fliers to wok or relax at the airport.

Airport lounges are a great place for frequent fliers to work or relax at the airport.

6. Business perks. Amex and Chase both have geared rewards programs and benefits specifically for their line of business credit card products.  Amex OPEN Savings gives automatic discounts at certain vendors: like 5% off Hyatt, 5% off Courtyard by Marriott and up to 10% off at Office Max as well as 90 days of purchase protection and extended warranties. For its part, Chase gives cardholders of both the Ink Plus and Ink Bold complimentary Lounge Club membership. It’s sort of like Priority Pass membership where you pay to join and then each time you visit a lounge, you pay a day pass fee. Lounge Club has 350 VIP airport lounges worldwide and membership is priced at $150 per person per year. Ink Bold and Ink Plus cardholders get two free lounge passes per year and then after that, they will have to pay the usual $27 per person per visit fee. The Ink Plus also gives you access to Chase’s Blueprint service which helps you design a plan to pay off purchases in flexible ways and track your spending.

7. More types of cards. Although many banks decide how many credit cards you can have based on your overall credit line limit, some banks have limits on the number of cards you can have. For example, you can only have four personal credit cards with Amex. However, Amex will let you get an unlimited number of business and charge cards as long as your credit is healthy, so if you’ve maxed out the bonuses that you can get on personal cards from a single bank, having the option to get business versions of those cards is a great way to keep those bonuses coming in and to be sure you are maximizing those category spending bonuses on every single purchase.
8. Establishing a business credit history. This one goes hand-in-hand with the fact that your business credit card’s line of credit doesn’t sit on your personal report. While you hopefully have a high personal FICO score to apply for the card in the first place, once that card is open, its entire record sits separate from your personal credit. If your business takes off and you apply for loans for purchases, real estate, or other large expenses, however, banks will look at your business line of credit when determining your interest rate, and the more established your line of credit, the better rates you’re likely to get.
American Express, Visa, and Mastercard all offer purchase protection so you

American Express, Visa, and Mastercard all offer purchase protection so you can feel safer when making big business purchases.

9. Protections. Although purchase protection and insurance is generally less generous on business credit cards than with personal cards, they can still provide valuable and comprehensive protections against fraud and on purchase the same as any Visa, Mastercard or American Express card does so that if something goes wrong with something your business purchases, it won’t have a crippling effect on your bottom line. For instance, both the Chase Ink Bold and Ink Plus cards as well as the CitiBusiness AAdvantage card are World Mastercards, which come with warranty extension, price protection, and Master Rental Insurance on car rentals – find more details on these benefits here. American Express’s OPEN Savings plan also offers a host of protections including warranty extension, purchase protection and car rental and loss insurance, so the benefits are fairly comprehensive.

10. More spending power. Business credit cards often come with higher lines of credit, which is how many small businesses get off the ground. Just remember, especially with business charge cards, you need to pay the bill off in full every month or else you’ll incur huge fees, which will likely negate the value of the points/miles accrued.

Disclaimer: The responses below are not provided or commissioned by the bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by the bank advertiser. It is not the bank advertiser's responsibility to ensure all posts and/or questions are answered.

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  • Points Surfer

    Points Guy, regarding #8, if you sign up for a business credit card as a DBA (you use your SSN for the application) will the business credit line still help your business’s creditworthiness, or do you need to use a business EIN for that?

  • Greg

    I caution those who want to double dip the Business and Personal side. These extra sign-up points come at a cost. In most cases these cards will incur fees at sign up (Amex Plat/Delta Reserve) and/or yearly membership fees (Chase). Its all well and fine the first year, you get that fat bonus and your off to Tahiti. Well what do you do next year when the fees come around and you no longer receive the bonus. Cancel the card? That has potential credit implication depending on your utilization. I recently had the Delta Reserve used it in 2012 and earned PM from the points boost and spend (Thank you Delta and Amex). However, I just canceled it to not incur the additional $450/yr fee. If you double dip into the business category you also need to take into account the fees on the card. A Delta Reserve personal and business will land you $900 in fees at sign-up! Want that Chase Sapphire Preferred, Bold and Ink. While great for the first year, you need to juggle almost $300/yr to hold those cards. Amex Plat $450 right off the bat. Amex Gold $175/yr after first year. With the sign-up bonus frenzy its great to get that initial boost in points, but keep in mind the cost of maintaining these cards and the potential credit implications of canceling them.

  • Jeff

    Canceling a business card doesn’t affect your credit score.

  • Wanting No Trouble with IRS

    If apply for a business card as a sole proprietor and show no revenue for the year, do you need to file a tax return for the business?

  • PSL

    I thought the Southwest Visa business card signup had decreased to 25,000 points recently, as per the link on the Southwest website. Are you certain that the 50,000 point bonus offer is valid, and, if so, is it possible to get the bonus so soon after getting the 50K bonus from the personal card, which I just received after being approved for the card in October? Thanks for all you do!

  • EugeneV

    #2. Business credit cards don’t sit on your personal score – not true for many issuers. Discover, Capital One, and many others report business cards on personal credit profile same way as personal cards. In addition, even issuers like Citi or Chase, which do not report them to the big three credit reporting agencies, still report Visa/MC applications and credit decisions to ARC, ICS and similar reporting agencies, so when banks pull those reports (for example, US Bank does) when you apply for a credit card with them, they do see all your personal AND business cards.

    Regarding some of the questions asked below, while merely opening a business credit card as a sole proprietor does not mean that you need to file a business tax return with the IRS, it may violate restrictions placed on you by your employer (check with your compliance department if unsure).

  • Hillrider

    Bad and incomplete advice: these cards don’t offer Federal protections of the Credit CARD Act of 2009, which applies to consumer cards only. This is a MAJOR issue, as the cards can do things to you when you least want or can afford them–all of them contain provisions that they can change the terms at will, and they do so.

    See a summary of the bill’s provisions which you lose on a “business” credit card at http://thomas.loc.gov/cgi-bin/bdquery/z?d111:HR00627:@@@D&summ2=m&

    This post reads like a one-sided, fluff sales piece, not a balanced one. What’s happening to you?

  • thepointsguy

    That’s what I said- they don’t have as many consumer protections, but they still have more protections than paying with cash/invoice. Would you not agree there?

  • thepointsguy

    They are guaranteed by your personal credit (thus the hard inquiry on your personal credit), but sit on your business credit report once opened. I have discussed this many times.

    I was not aware Capital One lists business credit cards on personal credit reports- will look into that. Seems odd they would do that

  • thepointsguy

    There were 50k signup bonus links floating around recently and although I haven’t applied, I’ve heard people are still getting in. Chase may auto-deny you, but just call the business reconsideration line at (800-453-9719).

  • thepointsguy

    I’m not a tax expert, but my guess would be no.

  • Ed

    I just got the Amex business card. What counts as an eligible business expense on my card? Can I buy groceries at Walmart and count that? It’s not for business, but it feeds my family.

  • EugeneV

    TPG, I enjoy reading your travel advice, but when it comes to credit reporting, unfortunately, you are clueless. Read what I wrote again. In addition to personal guarantee, in addition to hard inquiry with one or more of the “big three” (Experian, Equifax, TransUnion), all applications for Visa or MasterCard, business and personal, as well as credit decisions (approvals/rejections) are reported to ARC/ICS. It is not a typical credit report, but it is a consumer report, it does fall under FCRA (meaning, you can freeze it or request a copy if it was used for an adverse credit decision), and it is routinely used by some banks. They see all of your personal and business cards (well, Visa/MC). In fact, they can pull that report by address and look at the entire family.

    As far as also reporting to Experian Business or Equifax Business, some cards are reported and some are not, very issuer and product-specific; even fewer report to D&B. But many issuers, like I said, report business cards to EX/EQ/TU same way as personal – in fact, from looking at the report, you can’t even tell it’s a business card.

  • Dia100

    I had applied to a Gold Business Amex following your review about the 75000. points. You were stating that If I had not applied for a gold or platinum Business in the last 12 month the points should have been honored. I received the card and spent the amount that was requested in the time frame that was necessary. I never got the points. When I called Amex they stated that IT WAS NOT if I had applied on the last 12 month but if I had owned one of the cards on that period of time. I had been carrying a Platinum Biz for 12 years. Long story short, never received the points. Perhaps that is something that you should clarify better when mentioning the Amex bonus points.

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  • Margaux Milchen

    Chase business ink does not report to any business bureau. I just got a letter from them saying that they will not report to my dunn and bradstreet..very frustrating

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  • shay peleg

    Is a god card still super risky for FRS?

  • shay peleg

    Gotta cancel the card and wait

  • shay peleg

    Yep that’s why it’s not so bad

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