You determined your business strategy, secured the perfect location, and fine-tuned your product or service offerings. Now what? How about increasing your company's purchasing power and efficiency to facilitate business-related expenses? To do that, you’ll need a business credit card. 

What is a business credit card, and how does it work? 

A business credit card operates much like a personal credit card but is tailored specifically for managing the expenses of a small or medium-sized business. It provides a line of credit to purchase office furniture, equipment, and any other supplies essential for day-to-day operations. Please note that this blog post doesn’t cover corporate credit cards, which are meant for large to global businesses.

Like personal credit cards, some business cards may carry interest or late charges on balances not paid off at the end of each billing cycle. For this reason, it’s crucial to be informed and well-acquainted with the card's terms, such as interest rates and fees, to navigate financial management wisely and avoid unnecessary costs.

While both personal and business credit cards offer the convenience of a credit line, they come with distinct features and benefits. 

Let’s go over some of them. 

Differences between personal and business credit cards 

Understanding the differences between personal and business credit cards is key to choosing the best card for your company and ensuring it aligns with your financial strategy. 

Fees and interest rates 

Fees and interest rates are based on your creditworthiness but may differ across personal and business credit cards. Both types of cards offer a spectrum of interest rates, introductory offers, annual fees, and other fees. Although business cards may provide additional rewards or features tailored to your business needs, evaluate these against any associated fees before making a final decision, particularly if you anticipate carrying a balance.

Credit limits 

Credit cards tailored for small businesses usually come with higher credit limits than personal cards, accommodating the larger spending needs you will likely encounter when running your business. This higher limit can be pivotal in funding significant projects or purchases without facing cash flow disruptions. If the card limit isn’t large enough, many companies pay their card balance during the card cycle, sometimes several times, to increase their open-to-buy (i.e., a card's purchasing capacity at any point in time).

Record keeping and reconciliation

Opting for a business credit card over a personal one can simplify the tax filing process. Instead of juggling personal and business expenses on a single personal card statement and hoping for the best during tax season, separating these expenses from the outset ensures precise accounting and accurate financial records to file your taxes. Some credit card providers also partner with expense management platforms that allow you and your employees to capture receipts and other notes for any given transaction. This is particularly helpful for collecting transaction receipts and invoices to send to your accountant.  

Spend monitoring capabilities 

Some business credit cards provide critical additional tools and features to help companies manage and monitor business expenses.  With such capabilities, you can issue employee cards with individual spending limits, significantly streamline the expense management process, and enhance control over company funds. This is particularly useful instead of relying on checks or employees fronting the bill and submitting costs for reimbursements. You’ll also gain more detailed reporting on card usage, making budgeting and financial oversight easier than relying on manual payment methods.

Benefit programs 

Many business credit cards offer superior benefit programs, including cash back or points, discount offers, and travel advantages (such as lounge access, car rental insurance, etc.). The rewards on business credit cards tend to be more lucrative and relevant than those offered by standard personal credit cards. If you’re looking to maximize the return on every dollar spent in your business, it's wise to take advantage of these benefits and reduce overall costs since accumulated points or cash back can be reinvested into the business, offsetting future expenses.

How to choose a business credit card

Selecting the right business card is an important decision that can affect your company's financial health and efficiency. Therefore, carefully assess how a card's features align with your business’s spending habits and financial goals.

Consider the following factors when selecting a card provider to ensure it meets your immediate financial needs and supports your long-term business strategy.

Rewards and benefits 

Think about what types of rewards and benefits will be most beneficial for your business. There are many different cards in the market offering various reward programs. If travel is a frequent part of your business, consider cards offering travel rewards, particularly airline-cobranded cards. If your spending is more focused on office supplies or telecommunications, seek out cards that offer cash back or points in these categories. However, pay attention to reward limitations. Some credit cards offer a percentage of cashback up to a certain spend amount, while others limit the points to a specific merchant category. The key is to align the type of rewards and benefits with your regular business expenses.

Fees and interest rates 

Get clarity on the specifics of each card's terms to determine if the benefits outweigh the costs. Get familiar with introductory offers, which can provide significant savings in the short term, and long-term interest rates, which will apply once these offers expire. Consider annual fees—common with cards offering more extensive rewards and benefits—that may apply to primary and all secondary cards. Consider transaction fees that may apply to specific purchases, such as foreign transactions or cash advances, as well as late payment fees that can add up and affect the card's overall cost.

Credit limit 

A card’s credit limit is another crucial factor to think about. Is it sufficient to cover your expected business expenses over a 60-day period? What do you need to manage larger purchases or unexpected costs? Determine and find your ideal credit limit; however, approach this credit responsibly. While a higher limit provides more room to pay for business purchases, it also requires discipline to avoid overextending yourself and your business on financial commitments. Remember that a business’s credit card limit can also affect your personal credit score and your business's ability to secure future financing and favorable terms.

Virtual card capabilities

Another important factor to consider is whether you can create virtual cards from your business card. Virtual cards are essentially digital secondary cards, and while they have been around for a while for large corporations, they’ve only recently been available to small to medium-sized businesses. This means you can leverage virtual cards in your business to enhance security and reduce fraud risk when handling business purchases. Every virtual card you generate gets a unique card number, active until date, security code, and predetermined spend limit. You can create as many as you need and use them for both one-time and recurring payments. Aside from enhancing security, virtual cards are a powerful tool to streamline operations, especially in spend management, reconciliation, and expense tracking and reporting. Their digital nature allows you to instantly send virtual cards to anyone, anywhere, at any given time—be it employees, contractors, or even oneself—without the logistical hurdles and control issues often associated with traditional plastic cards. 

Business software 

While some card providers offer business credit cards, not all cards are truly designed with businesses in mind—those offering robust business features and tools. Many are essentially consumer cards branded as business cards without providing the essential business-focused features you need to run a company. For this reason, get clear on your specific needs before choosing a card and evaluate whether you can tap into business spend management features that enhance your ability to oversee spending. Some providers will allow you to access such tools-–their own or one of their trusted partners— enabling you to issue virtual cards throughout your organization, establish budgets, manage employee expenses, delegate bookkeeping or administrative responsibilities to specific individuals, and gain comprehensive insights into company spending via reporting tools. 

Third-party integrations

If your credit card provider offers a spend management platform, make sure it integrates well with your current business systems. The ability to seamlessly connect with third-party applications, particularly accounting software (eg, Quickbooks or Netsuite), can significantly enhance the efficiency and effectiveness of your financial operations. This compatibility will ensure that your financial data flows smoothly between systems, simplifying processes like expense tracking, financial reporting, and budget management. 

Customer service 

Good customer service can be invaluable, especially when dealing with financial products. Ensure you’re in good hands, as timely and effective support can make a significant difference when running a business. When evaluating different card providers, prioritize those known for their excellent customer support. Make sure they also offer comprehensive resources to help you manage your account efficiently, like online tools for tracking spending, collecting rewards, or accessing detailed account statements. The goal is to choose a card provider that not only offers a great financial product for your business but can also support you in managing your account effectively.

Security features 

Securing financial transactions is more important than ever. For that reason, consider the security features offered by your credit card provider to protect your business against fraud and unauthorized transactions. Features like virtual cards, real-time alerts, and secure online access via advanced encryption and two-factor authentication can add an extra layer of security to your account. Some cards may also provide the ability to temporarily lock or unlock the card from a mobile app, giving you immediate control in case the card is lost or stolen.

How virtual credit cards can help your business 

Now that you understand business credit cards and what you need to consider when choosing one, let’s dive deeper into the realm of virtual cards. Because although traditional credit cards offer a range of benefits, they can only take your business so far.

Think of virtual credit cards as a digital extension of a physical business credit card. Although a virtual card is an extension of your regular credit card, it acts as a distinct card, safeguarding your real account information. Each virtual card you generate holds its unique credit card number, CVV code, and, what's more, a customizable active until date and spending limit. 

More businesses are using virtual credit cards to extend the capabilities of their physical credit cards, thanks to the many benefits of virtual cards.

Increased security

Virtual cards were initially created with security in mind, specifically to safeguard physical credit cards during online transactions. Today, their utility spans beyond security, and they are used for more than one-off payments. The flexibility of virtual cards lies in the ability to generate as many as you want, eliminating the need to share physical credit card details among multiple users in your business. Instead, you can assign specific virtual cards to vendors, employees, projects, and client accounts. Virtual cards also allow you to set custom active-until dates and spending limits. This functionality not only caps expenses to prevent budget overruns but also reduces the risk of fraud and unauthorized purchases.

Better control and tracking 

With virtual cards, your business can gain unparalleled control over expenses. You have the flexibility to set exact spending limits for each card, activate or deactivate them to ensure they’re only charged when needed, and you can even configure them to expire immediately after their intended transaction takes place. For recurring expenses, you can customize virtual cards to automatically refill with a predetermined amount each month, preventing the risk of overcharges. This level of control, combined with real-time tracking capabilities, enhances your ability to budget and manage spending effectively. It also ensures all business expenses are in strict alignment with your company's policies and financial objectives, providing a streamlined and efficient approach to spend management. 

Simplified payments

Virtual cards significantly streamline the payment process, especially for online and recurring transactions. Gone are the days of waiting for ACH payments to process, writing checks and hoping they don’t get lost in the mail, or enduring delays or fraud when issuing and distributing physical cards. Instead, you can instantly create and use a virtual card in seconds. This immediacy and ease of use make virtual cards ideal for ensuring timely business payments —-whether it's settling invoices, managing subscriptions, or handling unexpected expenses. They provide an efficient way to keep up with payments, saving time and enhancing the overall operational efficiency of your business.

Increased team efficiency

Instantly empower team members, anywhere and at any time, with the ability to make purchases on behalf of your company — without having to share physical credit card details or wait for cards to arrive in the mail. Virtual cards offer the flexibility to manage multiple budgets and effortlessly issue any number of virtual cards, streamlining the distribution of funds throughout your business. This approach simplifies both reconciliation and expense tracking. Empowering your employees with virtual cards will not only make their jobs easier, but ensure smooth operations and a more detailed view of expenditures.

Improved cash flow 

Virtual cards can also help you improve cash flow. Their inherent flexibility and real-time visibility into transactions provide a comprehensive overview of your company's spending. This level of insight ensures you're always informed about how, when, where, and why your company funds are being used. Such detailed monitoring allows for a more proactive approach to managing operational expenses. This way, it's easier to maintain a constant pulse on cash flow, enabling strategic decisions that ensure company funds are available and used accordingly. 

Easy to use  

The ease of use of virtual cards is a major advantage for businesses. This is particularly evident in how seamlessly they integrate into existing financial systems and accounting software, enhancing overall efficiency. This integration simplifies the reconciliation process, making it easier to manage and track expenses. Their user-friendly nature ensures you can quickly adopt them into your financial workflow with no steep learning curve or extensive adjustments to your payment processes. 

More cashback and rewards  

Using virtual cards to pay for expenses traditionally covered by ACH, checks, or employee personal cards allows you to accrue more cashback and points. On average, businesses using virtual cards can capture a 25% to 30% increase of spend through their business account. So, if your business credit card offers a 1% cashback reward and you manage to add $1 million in incremental spending annually, your business can benefit from an extra $10,000. A significant perk you would miss by paying with conventional payment methods. 

Extend the capabilities of your business credit card with virtual cards 

As you’ve learned in this blog post, to conduct business effectively, you need a business credit card. But to truly enhance payments and streamline spend management, you ultimately need virtual cards. 

Discover how integrating virtual cards into your business can amplify the advantages of your existing business credit card.