DEFINITION of 'Business Credit Card'

A credit card intended for use by a business rather than for an individual’s personal use. Business credit cards are available to businesses of all sizes, including sole proprietorships, and they don’t show up on the cardholder’s individual credit reports or affect an individual's credit scores. If a business cannot repay its credit card bills, however, the business owner may be held personally liable for the debt, depending on the terms of the credit card agreement.

BREAKING DOWN 'Business Credit Card'

Business credit cards usually have unique benefits designed to entice business customers. These benefits may be different from the benefits offered to individual customers. For example, some business credit cards offer cash back on purchases at stores where businesses are likely to frequent, such as office supply stores. Business credit cards also tend to offer larger sign-up bonuses than individual credit cards in anticipation of high business spending.

Travel perks are another common benefit, since many businesses have significant travel expenses. A business credit card might entitle the holder to use an airline’s VIP lounge at airports or receive discounts on hotel stays during business travel. Business credit cards also sometimes offer more flexible repayment terms designed to appeal specifically to businesses, whose cash flow may be irregular.

In addition to offering the usual conveniences associated with credit cards, business credit cards help small businesses in particular to keep business spending separate from personal spending. This separation can be helpful for accounting and tax purposes. They also provide an easy way for employees to make purchases and for businesses to monitor employees’ business purchases.

Businesses that need to borrow money for more than the grace period provided by credit cards should consider other sources of financing. Credit cards are typically an expensive financing option compared with other types of loans, such as bank loans and lines of credit. In particular, a secured bank loan will likely have a lower interest rate than a credit card, because the secured loan has collateral that the bank can repossess and sell if the business defaults. Credit card debt is unsecured, meaning that it has no collateral and leaves the creditor with little recourse.

RELATED TERMS
  1. Business Guarantee

    A credit card agreement in which any debts accrued on a corporate ...
  2. Credit Card Balance

    The amount of charges, or lack thereof, owed to the credit card ...
  3. Credit Card Funding

    The ability to electronically fund a new account, business, or ...
  4. Credit Card Authorization Key

    A code used in credit card transaction authorizations that confirms ...
  5. Combined Guarantee

    A credit card agreement in which any debts accrued on the card ...
  6. National Issuers

    Credit card companies that give credit cards to creditworthy ...
Related Articles
  1. Small Business

    How to Use Small Business Credit Cards

    A small business credit card can be a convenient way to increase your company's purchasing power, but must be carefully managed.
  2. Personal Finance

    Understanding Credit Cards

    Credit cards are a type of unsecured personal loan between the credit card issuer and the credit card holder.
  3. Investing

    Investing In Credit Card Companies

    This investment requires keeping an eye on consumer indexes and the overall health of the economy.
  4. Personal Finance

    Best Credit Cards For People With Poor Credit Scores

    There are still ways you can build credit with a credit card, even if you have bad credit.
  5. Personal Finance

    Terrible Credit Score? Try These Credit Cards

    When your credit is less than stellar you have fewer choices. But some are still better than others. Here's our read on which cards to get.
  6. Personal Finance

    Credit Card or Cash?

    Credit cards are convenient to use, but not always the best choice. Here are 5 times you shouldn't pay with a credit card – and 5 times you should.
  7. Personal Finance

    How Many Credit Cards Should You Carry?

    If you have ever wondered whether you should carry one, two or more cards, read on and we'll tell you.
  8. Personal Finance

    Why More Millennials Need Credit Cards

    Here's why more Millennials should have credit cards – even though a majority don’t.
RELATED FAQS
  1. How do secured credit cards help me build my credit score?

    Find out how secured credit cards function and why they can be very useful for those looking to build or rebuild their credit ... Read Answer >>
Trading Center