Taking Charge

How Businesses Leverage Credit Cards

By Joel Nelson on Jul 10, 2023 in News

Business credit cards, which enabled close to $700 billion of spending in 2022, are as much a fixture in commerce as the personal cards used by the vast majority of adult Americans. “Both merchants and consumers would be completely stuck without the little plastic cards, with slowed transactions and virtually no online purchases,” according to Block, a financial services technology provider based in San Francisco.

Corporate cards first emerged in the late 1970s – 30 years after the first personal credit cards – and became widely adopted about 20 years later. In 1998, 37% of small businesses reported using a corporate card; 67% did less than 10 years later. Enhanced by chip systems and other safeguards, business credit cards are now available in digital as well as physical forms.

Broad value for businesses

All types of business owners, from sole proprietors, freelancers, small and large businesses, to LLCs and corporations, use credit cards for supplies, office furniture or travel. Corporate cards are useful for building credit, earning rewards and keeping overhead low by enabling large purchases with special financing. Their issuers often offer sign-up bonuses, rewards points or cash back that businesses can redeem for a variety of purposes.

Card issuers’ eligibility criteria for corporate cards, such as personal and business credit histories, are similar to those applied to individual applicants.

Business cards typically come with higher credit limits than personal cards to accommodate larger incomes and expenses. Some issuers offer business owners extended periods of interest-free financing longer than the typical period for a personal credit card. Such cards provide a longer grace period to pay off balances and flexibility to make business investments.

For tax liability, consumer protection, cash flow and other reasons, experts advise against using business cards for expenditures such as items for personal consumption, payroll, legal settlements and cash advances.

To card or not to card?

Keep in mind one key difference between individual and corporate cards: Liability protections provided to personal credit card holders in the Credit Card Accountability Responsibility and Disclosure Act of 2009, such as fraud liability nullification, payment grace periods and notice of increasing interest rates, are almost entirely absent from corporate card accounts.

“It’s important to assess all your options when deciding whether to use a business or personal credit card for your company’s expenses. Carefully consider your business’s needs and the benefits and drawbacks of each type of card before making a final choice,” says San Francisco-based financial advisor NerdWallet.