What Is The Best Business Credit Card?

If you're a business owner like me, you've probably asked this question more than once. When it comes to business credit cards, there is a whole gamut out there, and some business credit cards are not business cards at all. It's important to do your homework first.

First of all, let's talk a bit about how business cards work. If you are operating your business as a sole proprietor, you can still apply for a true business card, but there is less protection available from a liability standpoint in the event you default or if you are sued. However, if you operate your business through an entity, whether it be a limited liability company (LLC), corporation, limited partnership, or other entity, there are additional protections available because your entity is legally separate and distinct from you as an individual. 

This matters a lot when vetting which card to pick. Personal credit cards are opened in your name, and the activity on the account will be reported to the three main credit reporting bureaus (Equifax, TransUnion, and Experian). Your credit utilization, length of account history, default history, payment history, number of accounts opened, and other factors are all used by these bureaus to identify your creditworthiness. Remember, your own personal cards always report back to your personal credit report which is tied to your Social Security number.

But true business credit cards are different. These cards are linked to the tax ID number (also called EIN number) of your entity, and most of the cards will report to the business credit bureaus. These are Dun & Bradstreet, Equifax Small Business Financial Exchange, and Experian Business. Just as you personally have to build your own credit history, so does your business/entity.

There are still business cards out there (such as the American Express Open) that does NOT report to your personal credit UNLESS you default. But it will report to the business bureaus and help you build credit for your business and develop creditworthiness with other businesses as well as lenders.

Trade line credit is one of the best opportunities available, and this world is opened up to you by Dun & Bradstreet. You can obtain a D&B number which functions like a credit score, and many companies and businesses will use this score to rate you when you go to open a trade account (such as a supplier). An account like this functions as a charge account, which allows you to purchase your supplies and goods without cash up front. Typically you settle your account monthly.

Utilizing a true business credit card gets your foot in the door as you begin building credit and establishing your business's reputation. I highly recommend the American Express Open card which has no annual fee, 9 months 0% APR, cash back rewards, and it reports to the business bureaus but is entirely separate from your personal credit report (UNLESS of course you default!).

Remember that it's important to always check the terms and conditions of each card (and ask a representative from the issuing bank too) so that you are certain that the card will not report to your personal credit. Also make sure that the card reports to the business bureaus, because some don't.

For the win,

Adam Short