Living with credit, Rewards

How many business credit cards should you have?

John Egan

When I received my first business credit card earlier this year, I was pleasantly surprised – no, shocked – when American Express graced me with a credit limit of more than $20,000.

Lil’ ol’ me? A $20,000-plus credit limit for a solo entrepreneur? (I’m a full-time freelancer.) That’s a hefty amount of adult responsibility.

There’s no way, I thought, that I’d run up even close to $20,000 of debt on the American Express SimplyCash Plus card. And I haven’t done so.

Therefore, I’d never need a second business credit card, right? For now, that’s the case. But if I ever expand my business, I might want to expand the availability of credit for my business by obtaining a second credit card.

That leads to this question: Should a business have more than one credit card?

More cards equal more credit and more rewards
For someone like me, a solo entrepreneur, it really would make little sense to have a second business card. I don’t want the hassle of keeping track of a second piece of plastic, a second monthly statement, a second separate set of expenses.

But if I were running a startup or a more established small business, I could justify having at least two business cards.

Why?

Point No. 1: A larger business most likely would trigger more expenses. As such, my business and I would benefit from access to more credit. A credit limit of $20,000 or even $100,000 on one card might not cut it.

For instance, what if my business were buying a bunch of Facebook ads every month? Depending on the volume, Facebook advertising costs can add up quite quickly – perhaps to thousands of dollars or more per month.

If you’re like the typical small business owner, you’re probably able to handle charging those Facebook advertising bills. The average credit limit for an owner was around $56,000 in December 2015, according to a study by credit reporting bureau Experian.

Point No. 2: Given the bigger budget of a bigger business, it would be smart to spread around the expenses on more than one card so you can reap different kinds of rewards, such as cash back from one account and airline miles from another.

Be sure to keep in mind what the annual fees are for each card so that they don’t cancel out any perks you garner.

Another advantage of having more than one credit card for your business is that it offers the ability to divvy up expenses. For example, maybe you purchase office supplies with one card and cover travel expenses with another.

Ultimately, you’ve got to decide what’s right for your budget, your debt tolerance and your needs when it comes to getting one business credit card, several business cards or no business card at all.

The case for one business credit card
Michael Reznik is in the one-card camp with me. He’s co-founder and CEO of UpCart.com, which makes and distributes folding hand carts and hand trucks. The Ohio-based startup is on track to post revenue of more than $5 million in 2017.

Reznik says UpCart.com puts as many business expenses as it can on the company’s Capital One Spark Business card, in part to ease the tracking of costs and to earn rewards.

“I strongly suggest sticking with only one credit card that is only used for the business and not ever mixed with personal expenses,” he says.

“The primary reason is to simplify the reconciliation process and to avoid any surprises when it comes to paying your bill. One account allows you to track spending, manage the budget and reconcile at month end much easier.”

UpCart.com had looked at applying for a second credit card, Reznik says, but wound up successfully persuading Capital One to bump up the credit limit on the company’s current card.

The case for two (or more) business credit cards
On the flip side, Adil Baguirov makes the case for a small business to have a least two credit cards. His Ohio-based transportation and logistics company, American Power, has three credit cards: one each from American Express, Chase and PNC Bank.

Among other reasons for having several business cards, Baguirov cites the various perks that come with the cards, along with the capacity to further beef up the credit history of your business.

“Lenders like to see a variety of accounts and … that the business has already been trusted by multiple financial institutions,” he says. “There is no downside and only positives in having more than one business credit card.”

Whatever you do, don’t blindly apply for a stack of business credit cards.

All the rewards and other perks you can pile up are alluring. What’s not alluring, however, is amassing a crippling amount of credit card debt – debt that could cause you to lose your business and your livelihood.

See related: My business credit card makes me feel like a grown-upBest business credit cards, How small-business owners use business credit cards, 7 things to know about business credit cards, Business credit card reviews

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