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7 credit card rules every business owner should follow

March 02, 2020
12 min read
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When it comes to business credit cards, there are no absolute rules, à la the 10 Commandments for Travel Rewards Credit Cards. There are, however, principles every small-business owner should follow when applying for and using business credit cards. Call it the Bill of What’s Right.

Some of these business credit card rules are similar to the rewards-card edicts handed down by Senior Editor Nick Ewen. For example, you should never miss a payment or pay late. Although account activity on business credit cards often remains separate from your personal credit, failing to pay on time can wreak havoc on your business credit rating and might cross over to affect your personal credit as well. Your payment history is a top factor in your business credit score.

Related reading: Who might be eligible for a small business credit card

Read on to discover the seven most important rules you need to know when it comes to business credit cards.

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Rule #1: Use business credit cards for business expenses

(Photo by Hero Images / Getty Images)
(Photo by Hero Images/Getty Images)

Comingling your personal expenses with your business expenses is a classic faux pas. Yet it happens often as entrepreneurs use personal credit cards to jump-start their companies.

Are you guilty of putting business transactions on your personal cards? If you are, it’s time to get a business credit card. Besides separating expenses, opening a business card can:

  • Help build your business credit score: A good commercial credit score might help you qualify for larger lines of credit as your business grows. Your vendors and potential customers may also look at your credit to gauge the risk of doing business with you. (Unlike personal credit information, which is protected, anyone can pay for access to your business credit data.)
  • Protect your personal revolving utilization ratio if you can’t pay off the balance each month. Many business credit card issuers don’t report information to the consumer credit bureaus, as long as you pay your bills on time. If a business card doesn’t show up on your consumer credit reports, it won’t impact your personal credit utilization.
  • Write off interest payments on your business taxes. Business expenses are generally tax-deductible. To qualify as a business expense, the Internal Revenue Service says the purchase must be both ordinary and necessary.

The rule against comingling expenses goes both ways. You should avoid using a business card to pay for personal expenses too. Not only could mixing expenses cause you tax headaches, but using a business card for personal transactions may also be against your card issuer’s terms and conditions.

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Here’s the language included on the application for The Business Platinum Card® from American Express: “By submitting this application, you, as an individual and the Authorizing Officer of the Company…are REPRESENTING THAT ALL CARD(S) ISSUED ON THE ACCOUNT WILL ONLY BE USED FOR COMMERCIAL OR BUSINESS PURPOSES.” (No emphasis added.)

Besides incurring an issuer’s wrath, there’s another good reason to avoid using business cards for personal expenses. Business cards generally have fewer consumer protections along with higher interest rates and fees.

Related reading: Best business credit cards of 2021

Rule #2: Monitor Employees’ Card Use

You don't have to pay an annual fee when you give your employees company credit cards. (Photo by Luis Alvarez / Getty Images)
You don't always have to pay an annual fee when you give your employees company credit cards. (Photo by Luis Alvarez / Getty Images)

If you have employees, you may want to make them authorized users on your business credit card. This choice is fine — and may be necessary for you to run your business effectively. Adding employees as authorized users doesn’t have to be an expensive proposition, either. Free employee cards are perks that some cards provide, including the Capital One Spark Miles for Business.

Still, you shouldn’t be hands-off about your employees’ credit card use. Don’t distribute cards without establishing proper controls. You don’t want to be the business owner who lost $500,000 to a thieving employee. You should monitor statements every month, set up spending alerts, and even set up spending limits — perks which are offered by cards such as the American Express® Business Gold Card.

Rule #3: Consider a Card With no Preset Spending Limit

(Photo by Eric Helgas/The Points Guy)
(Photo by Eric Helgas/The Points Guy)

If you’re going to use your business credit card as a major way to finance your company expenses, you may need the flexibility of a card with no credit limit. Some cards, such as the Business Platinum, come with no preset spending limit. This spending freedom could help you when you need to make a large purchase. Enrollment required for select benefits.

If you’re turned off by the big annual fees some of these cards levy, consider the no-annual-fee Blue Business® Plus Credit Card from American Express (see rates & fees). Although the Blue Business Plus card is a credit card, it still allows you some spending flexibility. You can spend above your credit limit as long as you repay at least the overage plus your minimum monthly payment by the bill’s due date. If you fail that, the account’s penalty APR may kick in for the full account balance.

Rule #4: Get a Credit Card That Rewards Your Business Spending

(Photo courtesy of Shutterstock)
Look for cards that offer higher points on purchases that businesses need to make, such as office supplies. (Photo courtesy of Shutterstock)

If your business doesn’t require you to travel much — even if personal travel is a big deal to you — getting a business card that offers big rewards primarily on airfare or hotel spending makes little sense. You may be able to find a card that’s better suited to your business spending habits.

The great thing about business credit cards is the diversity of bonus categories available. If you spend a bunch on advertising, there are cards for that. If you spend heavily on office supplies, you have your choice of great cards that will reward you well. Some business cards even offer better-than-average rewards on spending on non-bonus categories.

You can also find a trio of Chase cards to ensure you’re earning attractive rewards on just about every business transaction you make. The trio includes the Ink Business Unlimited Credit Card, Ink Business Cash Credit Card and Ink Business Preferred Credit Card.

Here’s how to use these three cards to get the most bang for your business buck:

  • Ink Business Unlimited Credit Card earns 1.5% cash back on all purchases, which could earn you a return of up to 3%, based on the most recent TPG valuations, if you transfer the earnings to a credit card you own that’s part of the Ultimate Rewards program.
  • Ink Business Cash pays 5% back on the first $25,000 spent in combined purchases at office supply stores and on cellular phone, landline, internet and cable TV services each account anniversary year. Then 1% on all other purchases.
  • Ink Business Preferred Credit Card, an Ultimate Rewards card, earns 3x points on the first $150,000 spent in combined purchases on travel, advertising purchases (made with social media sites and search engines), shipping, internet, cable and phone services each account anniversary year. Then 1x point on all other purchases.

Related reading: Chase Ink Business cards showdown: Cash vs. Unlimited vs. Preferred

Rule #5: If the Card’s Not Right, Don’t Simply Cancel It

When the bank cancels your credit card and you have to destroy it, it can have serious consequences on your credit score. (Photo via Getty Images)
(Photo via Getty Images)

Just as closing a personal credit card might harm your personal credit score, closing a business credit card can potentially have a negative impact on your business credit score. Closing a card reduces your available credit. If your credit report shows you’re carrying a balance on any credit card, closing a card increases the overall percentage of credit you’re using — your credit utilization ratio.

Related reading: Does closing a business credit card affect my credit score?

Let’s say your credit report shows you have $20,000 in credit card balances and $100,000 of available credit (aka, total credit limits). In this scenario, your credit utilization rate is 20%. Now, imagine that you decide to cancel a card with a $40,000 limit and a $0 balance. Your utilization rate would jump to 33% because your available credit is now $60,000 instead of $100,000.

Now, business credit scoring is typically less transparent than personal credit scores. We don’t always know precisely how much utilization plays a role in business credit scores. (Utilization influences 30% of personal FICO Scores.)

With some business credit-scoring models, like Dun & Bradstreet’s PAYDEX Score, your company’s credit utilization rate doesn’t influence its credit score at all. But business credit card utilization is a factor (among others) listed by at least one of the major business credit bureaus — Experian.

Experian’s business credit-scoring model assesses the following factors:

  • Historical payment behavior with previous creditors
  • The presence of derogatory public records on the business profile, such as collections, liens, judgments and bankruptcies
  • The status, recent status, frequency and dollar amounts of any applicable liens, judgments or bankruptcies
  • An increased trend in slow payment of obligations
  • An increase in the number of business credit inquiries or applications that are generated by the business or owner
  • The number of trade experiences, balances outstanding, payment habits, credit utilization and trends over time
  • Years in business, line of business or Standard Industrial Classification (SIC), size of business and other demographic data

In general, you shouldn’t cancel a business credit card unless you know it won’t create a material change in your utilization rate. Also, make sure you use all your earned points and miles before you cancel any card. Otherwise you will forfeit the rewards.

Related reading: What to do before you close a credit card

Rule #6: Take Advantage of Welcome Offers

Depending on the size of your business, you may put more spending on your business credit card than you would on your personal credit card. A number of business credit cards require some hefty spending requirements to earn big rewards. If your business spends thousands of dollars a month, take advantage.

You could:

  • Earn 120,000 Membership Rewards points when you open the Business Platinum card after spending $15,000 on eligible purchases within your first three months of card membership. TPG values the full welcome bonus at $2,000.
  • Earn 100,000 Ultimate Rewards points when you open the Ink Business Preferred Credit Card and spend $15,000 on qualifying purchases within the first three months of card ownership. TPG values this bonus at $2,000.

Rule #7: Take Advantage of Spending Bonuses

Along with welcome bonuses, you could earn big rewards by getting a business credit card that rewards you for annual spending. Such threshold bonuses typically are found on cards that offer airline or hotel rewards. Here are some examples:

  • Earn a $99 companion certificate after spending $30,000 or more in a cardmember year and renewing your card with the CitiBusiness® / AAdvantage® Platinum Select® Mastercard®. (Account must remain open for at least 45 days after anniversary date.)
  • Earn a Weekend Night Reward from Hilton Honors after you spend $15,000 in a calendar year with the Hilton Honors American Express Business Card. You can earn a second Weekend Night Reward if your spending in a calendar year tops $60,000.

The information for the CitiBusiness AAdvantage Platinum card has been collected independently by The Points Guy. The card details on this page have not been reviewed or provided by the card issuer.

You should only aim to take advantage of these bonuses if your business can justify this amount of spending and you travel frequently for work.

Bottom line

If you use business credit wisely, it could help you grow your business, save your company money and earn rewards as an added bonus. All you have to do is follow a few simple rules. Combine the seven rules above with the 10 commandments for travel credit cards mentioned at the top of this post, and you’ll put yourself and your business in a great position.

For rates and fees of the Amex Blue Business Plus card, click here.

Editorial disclaimer: Opinions expressed here are the author’s alone, not those of any bank, credit card issuer, airline or hotel chain, and have not been reviewed, approved or otherwise endorsed by any of these entities.

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