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4 Signs You Should Apply For A Business Credit Card

You might think business credit cards exclusively belong to corporate middle managers who use them to pay for overpriced meals and hotel rooms. But if you run your own side hustle or have launched a start-up, there’s a good chance you can get one of these cards — and they have plenty of uses beyond just paying for business trips.

Much like applying for a personal credit card, opening a business credit card must be done thoughtfully. Aside from understanding the fees, rewards, bonuses and interest, you’ll also want to make sure you and your business are in the right place for taking full advantage of a business credit card.

Below, CNBC Select explains four signs that you may be in a good position to apply for a business credit card.

What we’ll cover

You need to separate your business and personal expenses

Juggling both personal and business expenses can get confusing, especially come tax time. Having checking accounts, savings accounts and credit cards dedicated solely to your business expenses can help protect your personal credit and cash flow.

Examples of things you might charge to a business credit card include software subscriptions, office supplies, business travel and more.

As your business starts to grow and you file for LLC or S-Corp status, it becomes even more important to keep your professional and personal expenses separate. This way, you can easily track the money that comes in and out of your business (your cash flow) and use tax deductions (such as writing off certain business expenses) to your advantage.

Perhaps most importantly, separating your work funds from your personal accounts helps protect you in the event your business suffers a severe financial setback. If someone sues your business or you have to file for bankruptcy, for example, the firewall between your accounts can prevent your personal assets from becoming fair game (depending on the structure of your business).

Your personal credit card has a low limit

What is the credit utilization ratio?

Simply put, your credit utilization ratio is the amount of credit available to you that you’re currently using. For example, if you have four credit cards and each one gives you a limit of $5,000, the total credit available to you is $20,000. If across these four cards, you have an outstanding balance of $5,000, that means your credit utilization ratio is 25%.

You have a good personal credit score

When you’ve never had business credit before, issuers may use your personal credit score to decide if they will issue you a business card. This is beneficial to those with a good credit score, but if you have a low or poor personal credit score, this can impact your ability to be approved for a business credit card with favorable terms.

You can use Experian to check your personal credit score for free before submitting an application for a business credit card. If your credit score isn’t in the ideal range (good to excellent), Experian also suggests actions you can take to help improve your score, like lowering your credit utilization ratio.

Experian Dark Web Scan + Credit Monitoring

On Experian’s secure site

  • Cost

  • Credit bureaus monitored

  • Credit scoring model used

  • Dark web scan

  • Identity insurance

Once you’ve checked your personal credit score and feel comfortable moving forward with a business credit card application, you may also be asked to provide some information about your business, like your business name, industry and number of employees.

You might need a business loan one day

Having your business expand can be exciting, but growing a business often means growing expenses. You might offer a new product, hire employees or need to purchase even more supplies. Business loans can help give you the financial room your company needs to seize on an opportunity.

For instance, the Small Business Administration (SBA) offers a 7(a) Small loan with a funding amount of up to $500,000. The SBA offers other types of loans as well with lending amounts of up to $5 million. Other lenders may also offer business loans with large funding amounts, so getting a loan can give your business a ton of flexibility.

However, approval can depend on your credit score as well as other factors like the desired loan amount. Having a higher business credit score that’s well established can help you get approved for larger loans — and, oftentimes, getting a business credit card with a relatively small credit limit can help you establish your business credit in the first place.

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What are the best business credit cards?

There are a handful of business credit cards on the market that suit a variety of business needs, including travel, office supply purchases and even cash back.

CNBC Select ranks the Capital One Spark Cash Plus Credit Card as the best business card for cash back since it offers 2% back on all purchases regardless of the category you spend in. One of this card’s more unusual features is that it doesn’t have an APR. However, it will charge a 2.99% late fee if you don’t pay off your balance in full each month.

The Ink Business Preferred® Credit Card is also an appealing option because it offers a strong welcome bonus of 100,000 points after you spend $8,000 on purchases in the first three months from account opening. This welcome bonus works out to be $1,250 toward travel when redeemed through Chase Ultimate Rewards®, giving you the option to redeem those points and book travel for your next business trip potentially for free.

Ink Business Preferred® Credit Card

  • Rewards

    Earn 3X points per $1 on the first $150,000 spent in combined purchases in select categories each account anniversary year (travel; shipping purchases; internet, cable and phone services; and advertising purchases with social media sites and search engines), 1X point per $1 on all other purchases

  • Welcome bonus

    Earn 100k bonus points after you spend $8,000 on purchases in the first 3 months from account opening. That’s $1,000 cash back or $1,250 toward travel when redeemed through Chase Ultimate Rewards®

  • Annual fee

  • Intro APR

  • Regular APR

  • Balance transfer fee

    Either $5 or 5% of the amount of each transfer, whichever is greater

  • Foreign transaction fee

  • Credit needed

Bottom line

Business credit cards can be a handy financial tool to have in your back pocket if you run any sort of company. You’re ready to apply if you meet one or more of these four signs: wanting to separate business from personal expenses, needing more credit, having a good credit score to show for and/or anticipating needing a business loan.

And when you do get that first business credit card, remember to practice the same financial hygiene you would with a personal card — don’t fall behind on your payments and try to pay the balance off in full each month — to keep your credit score in tip-top shape.

Why trust CNBC Select?

Editorial Note: Opinions, analyses, reviews or recommendations expressed in this article are those of the Select editorial staff’s alone, and have not been reviewed, approved or otherwise endorsed by any third party.

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