How to choose the best business credit card for your startup

As the founder of a growing company, there are plenty of good reasons to consider using a business credit card. Not only can it help you keep personal and business finances separate, but it can also come in handy to extend cash flow, help build business credit, and improve your bottom line through perks and rewards.

Corporate cards are a great way for startups to get the best of both worlds in terms of convenience and benefits. However, for those new to business credit cards, picking the right card for your company can feel like a daunting task

Here we take a closer look at some of the main considerations when applying for and choosing the best credit card for your business. Even if you already have a business credit card (or several) and want to add another card to complete your robust financial stack, the following points are still worth considering before you click “Apply”.

Key takeaways:

Business credit cards can help founders separate business and personal finances, build credit, and manage cash flow. Choosing the right card depends on your company’s stage, spending habits, and whether you need rewards, expense controls, or employee card options.

Knowing how to get a business credit card and what you need are the first steps. After you first incorporate your startup, you might not need a lot of bells and whistles around how you handle payments. Debit cards are often the perfect payment solution. They make it easy to manage your finances because you can never overspend. You can always see how much money you have left in your account, as well as easily track recent charges. What’s more, debit cards are accepted almost universally, and some checking accounts even allow you to easily issue cards to employees and set custom user permissions.

That said, while adding a business credit card to your financial stack may not be necessary at this point, it can be a smart move for your business if you want to grow and scale. For example, many business credit cards give you rewards points for every dollar you spend with your card. This is a great way to save money on things like office supplies and travel expenses — all while extending your runway.

It may be time to consider applying for a business credit card if you:

• Frequently spend on travel: Business credit cards can offer unique travel perks and rewards, such as rental car protection and airport lounge access. However, when it comes to travel, the main reason you might prefer a credit card is that it can help circumvent the occasional 5–7 day hold levied by hotel and car rental companies.
• Have big-ticket recurring subscriptions: Many cards offer discounts or rewards for spending on software like Google Workspace, or for hosting on AWS.
• Want to improve cash management: Although most business credit cards will not dramatically extend your runway, some credit cards will allow you to pay off your card early or set a statement date that works with your business cadence. This helps alleviate the fear that two major charges — for example, payroll and a big software subscription payment — will occur on the same day.
• Are planning to hire more employees: If your company is issuing cards to employees, you’ll benefit from the additional spend management and fraud protection that corporate cards offer.

Once you’ve decided to add a business credit card to your startup's financial stack, you may find it tricky to pick the right one. First, make sure that you understand your company’s needs. For instance, do you need cashback or travel benefits? Are there any other features that would be beneficial for your company?

You’ll need to find the right balance between the perks your startup wants and the cards that make sense for your company’s spending patterns.

Here are a few questions to ask yourself before making a decision about what card makes sense for your startup:

Business Credit Cards

A business credit card is much like a personal credit card. They do not need to be paid off in full every month. Instead, each charge is made — technically speaking — as a loan and recorded on a monthly credit card statement. The total loan amount (i.e., the credit card balance) is repaid to the credit card issuer with monthly installments and interest. This type of loan can have initially lower interest rates than other loans (such as personal or business loans). However, if the credit card balance is not paid on time, you may find yourself paying high interest rates and late fees as a result.

Because both types of corporate cards are often issued by other firms and not by your primary bank, they may also require you and your team to spend a significant amount of time each month consolidating records and information on spending, payments, and rewards on different platforms.

Secured vs. unsecured business credit cards

Most personal credit cards are unsecured, meaning you do not need to provide any type of collateral. Business credit card can be either secured or unsecured, depending on what the financial institution requires. 

With a secured credit card, you’ll make an upfront cash deposit into a bank account. The amount of the deposit is usually equal to your credit limit. The lender might require a secured credit card for companies with a poor credit history, because it reduces the risk. 

Unsecured business credit cards don’t require any type of collateral. The bank offers you a card based on your creditworthiness and business profile. These cards are much more common and don’t tie up your cash with a deposit. However, they usually require you to have strong credit. 

Personal guarantee

A business credit card may require a personal guarantee. A personal guarantee means that you, the business owner, are responsible for the debit if your business can’t pay it back. Even though the card is in the company’s name, a personal guarantee gives the bank extra assurances that the debt can be repaid — especially if your business is new. It’s like a safety net, but different than providing actual collateral for the credit card. 

A no-guarantee credit card means that the lender is relying only on the business’s income to repay the credit card. 

Lenders might be more willing to give you a credit card if you provide a personal guarantee. However, this comes with some risk to you. If your business struggles and can’t make the credit card payments, the debt can impact your personal credit score and you’re on the hook to repay. 

Corporate credit cards

Business credit cards are designed for businesses where the owner(s) are closely tied to the company’s finances. Approval for business credit cards are often based on the owner’s personal credit history.

Corporate credit cards, on the other hand, are geared toward larger, well-established companies. Corporate credit cards might be distributed to hundreds of employees within the company, so the cards need more detailed reporting or expense controls. Approval is based on the company’s finances, like cash reserves and credit history, instead of an individual. 

Charge cards

Although they share similar features to traditional corporate or business credit cards, charge cards are often better for founders and small business owners interested in money management and rewards. However, because of their similarities, it’s easy for people to conflate or confuse the two. Additionally, many charge cards — including IO, in Mercury’s case — are marketed as credit cards simply because “charge card” isn’t as recognizable of a term.

With a charge card, purchases are still made with credit like a traditional credit card, with the main difference being that you have to pay back the full sum at the end of the payment cycle, which is normally 30 days. In this way, a charge card can help increase awareness around how and where your company is spending money since it requires you to pay down your balance and assess your spending on a monthly basis without letting a balance carry over.

Additionally, charge cards are often designed to make it especially easy to reconcile your account and track your spending — ultimately saving you a significant amount of time.

While not the case for all charge cards, some can help establish your company's credit history. They’re also excellent alternatives for small or VC-funded startups that don't need to rely on credit financing, which is often very expensive.

EIN-only credit cards

With business credit cards, you’ll typically provide your company’s Employer Identification Number (EIN), along with your Social Security Number (SSN). The lender checks your personal credit, whether or not you’re providing a personal guarantee.

An EIN-only credit card requires only your company’s EIN, and not your SSN. That means the lender is looking only as your business’s financial profile and business credit, and not your personal credit. 

These cards are much harder to qualify for. Your business needs to have strong revenue and a well-established business credit profile. 

P-cards

A purchasing card, or p-card, is a type of company credit card given to employees. Traditional business credit cards might cover a wide range of expenses, including travel or utilities. P-cards are more tightly controlled and used for buying business-related goods or paying for everyday operational expenses.

A p-card’s administrator sets limits on where, when, and how much employees can spend. P-cards typically integrate with accounting or expense management software, to make tracking employee expenses easier.

Installment business cards

Installment business cards are like a hybrid between a credit card and a loan. Purchases on the card are converted into fixed monthly payments over a set period of time. Traditional cards either require you to pay the balance in full each month, or roll the unpaid balance forward to the next month. 

With an installment business card, the amount you spend is broken into installments, such as six or 12 months. With an installment card, businesses can better manage their cash flow because they know exactly what the monthly payment will be and when the card will be paid in full.

How easy is the application process and how will your credit limit be determined?

It’s important to know how to apply for a business credit card and what creditors will look for. With credit cards — and even with charge cards — the card provider is taking on credit risk by betting on whether or not customers will repay their balances. Different providers think about underwriting this risk in different ways, which can materially impact the process of getting approved for a credit card and what your spending limit is.

Many traditional providers will underwrite the profitability of your business and determine your credit limit relative to your profitability. While a larger, profitable company won't likely have an issue here, earlier-stage companies may find that this makes it difficult to qualify for a meaningful credit limit — or even qualify for a credit card at all. This may be the case even if you are well-capitalized and have plenty of cash in your bank account.

When managing your company’s finances, speed can also matter. For example, if you need a credit card to spend money on online advertising, waiting weeks for paper forms or cumbersome applications to be processed can mean it takes you longer to grow your business.

You never want to rush a card selection decision, but you should also feel confident that you’ll be approved in a timely manner with minimal unnecessary steps when the time is right.

Both charge cards and traditional credit cards tend to offer rewards in the form of either points or cashback.

Cashback credit cards are usually straightforward. As your business spends money using the card, you build up a cashback balance. However, the rate at which you can earn and redeem cashback will vary depending on the card you choose. Many corporate card programs require you to reach a certain threshold before gaining access to your cashback. In most cases, you must also remember to log into your account to redeem your cash balance manually, though there are some cards on the market that do automatically deposit cashback into the account of your choice each month.

With points cards — as opposed to cashback-centered cards — you typically earn “points” or rewards in some other unit besides a dollar amount, such as miles, for example. Some cards also offer bonus points for certain spending categories, which can then be redeemed for a mix of rewards, including statement credits, gift cards, business travel, or airline transfer points for booking business or personal travel.

Some corporate card providers even allow you to pass your business points to your personal credit card. This gives you the option to redeem travel points and gift cards for personal use. That said, these kinds of rewards tend to be easier for solo founders and small teams, as managing multiple reward redemptions and bonus categories can quickly become tricky.

In determining what rewards program might be the best fit for your business, consider if you or someone on your team has the bandwidth to manage redemptions and track points. You’ll also want to check redemption policies as some credit card programs require you to have been a customer for 12+ months or to spend a certain percentage of your credit line each month before points become redeemable. In some cases, you may have to meet a minimum points or cashback threshold before you can redeem your rewards.

Beyond points and cashback, many credit cards also offer substantial discounts on software and other services that can help your startup scale, including AWS.

In short, when considering a card program, take a deep look at your company’s highest spending categories and select a card that will reward your spending and help your startup cut costs in key areas.

Since your business likely qualifies for several types of cards, the one you choose should match your business's needs and the perks that benefit you the most.

Freelancer

A solo business owner would benefit from cards with low fees or attractive rewards. The business likely does not have a business credit profile and may not have a separate EIN.

Growing small business

Rewards are certainly a perk for small businesses, but the company may need additional controls or team cards for employees who need to make purchases.

Startup (pre-revenue)

A pre-revenue startup should prioritize business credit cards without a personal guarantee, so the founder isn’t personally liable if the company has financial issues. 

Startup (funded)

If a startup has received funding, it can prioritize business credit cards that have expense control and integrations to support the business as it scales.

Enterprise

Large companies should centralize spend management and look for employee cards that have purchase controls and policy enforcement. 

If you are a foreign founder or conduct a lot of business outside of the U.S., card acceptance is a major consideration when choosing a corporate card.

First, make a list of the countries in which you plan to use your credit card. Then, take a look at the credit card network (Visa, Mastercard, American Express, etc.) and identify if they are present in those countries. For instance, Discover — while accepted pretty widely across the U.S. — can’t be used in countries like Mexico and Germany.

Mastercard and Visa, on the other hand, are among the most accessible credit card networks, both domestically and abroad. Customers who have one of these two types of cards will be able to pay at most businesses worldwide.

If you are making payments abroad, you should also consider whether or not your card provider charges foreign transaction fees. It is common for Mastercard and Visa to charge foreign currency exchange fees with each transaction made in another currency, but be careful of card providers charging additional fees. With foreign transaction fees ranging up to 3%, this can dramatically decrease your purchasing power in other countries.

If you make frequent online payments, you might also want to consider a card program that includes virtual cards. Virtual payment cards are ideal for making secure payments online and with your mobile wallet (ApplePay, Google Pay). Since the card number is not connected to a physical card, they are impossible to clone or lose. This can help protect your business from unauthorized charges, while saving you the hassle of reissuing cards to your employees should a fraud incident or loss occur. Additionally, virtual cards allow you to easily track and manage your business's online spending, as you can set limits on how much you spend and where you spend it. This can help you better control your business's finances and ensure that you are not overspending in any areas.

Building a strong business credit profile has the power to open a ton of doors for your startup. It can increase your company's access to capital, help you establish credibility with partners and vendors, and help you navigate economic uncertainty during market downturns or periods of atypical cash flow.

For any company, but especially for younger companies, it's important to consider whether a business credit card will help build up your credit profile over time — specifically, whether or not the card you're going with will report to one of the main business credit bureaus.

Of course, leveraging a credit card to strengthen your business credit doesn't just come down to picking the right card — it's also a matter of following best practices when using your card. Keeping your credit utilization low and paying off your balance on time each month are both key factors that will determine whether your credit is improving as a result of your credit card usage, or taking a hit.

As you scale, you may want to issue your employees credit cards. Perhaps you are offering a one-time office setup budget, a weekly lunch stipend, or you’ve onboarded a traveling sales team. No matter why you choose to issue employee cards, doing so can help you earn more rewards while keeping clearer records of spending across the team. Credit spending also offers additional fraud protection, security, and card controls when compared to traditional reimbursement options.

If you plan to issue employee cards in the future, consider the following when selecting your credit card provider:

• Annual fees: Some credit card providers charge you an annual fee multiplied by the number of cards you issue. Others offer unlimited virtual and physical cards for employees with no annual fee.
• Easy onboarding: If you hire more than a few employees, it can be tedious and time-consuming to issue employee cards and update user permissions with traditional banks. However, a few providers allow you to connect directly with your HR management system to issue new employee cards, or they may offer an integration that allows you to bulk-issue cards with custom limits.

Corporate cards can help you keep personal and business finances separate. However, as a newly incorporated company, many traditional financial institutions may require a personal credit check to determine eligibility for business credit cards. This can affect your personal credit score, so be cautious if you are planning to take out any loans or apply for individual credit cards in the immediate future.

If you have poor credit, many card companies may approve you if you’re willing to submit payments more frequently or accept a smaller credit line to start. You may also qualify for secured credit lines that require a security deposit or personal guarantee when you open an account.

Luckily, many new credit card providers that make credit decisions based on your business and your business’s financial history — rather than your personal financial history — have emerged in the past five years. These cards require no credit check or personal guarantee.

If you’ve established that you’re interested in applying for a corporate card, familiarizing yourself with the above considerations is just the beginning. When you think about the difference a credit card can make in your company’s bottom line — as well as all the ways you can benefit from using credit cards wisely — choosing the right card feels less like homework and more like an exciting opportunity for shaping the future of your company.