Small Business Credit Cards vs Purchasing Cards

Cody Cromwell
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Small Business Credit Cards vs Purchasing Cards at a Glance

It’s not easy to know which credit card application is right for you and your business. There are a few considerations that you’ll want to make. Here is a brief rundown so that you’ll better understand which financial strain option best suits you.

When to Use Small Business Credit Cards

Small Business Credit Cards make sense for businesses that don't have any credit card accounts open.

The very first question to ask yourself is if you currently have a credit card or account open with a particular credit card company. For example, suppose you have a merchant account with a traditional credit card processor (even if it is with a startup).

Have you opened any other credit card accounts with traditional credit card processors? If the answer is yes, please do not pass this article as it really applies to you. If the answer is no, then reading on!

Startups traditionally can't sustain themselves without taking on any type of existing receivable/ customer relationship. This is a huge obstacle for small businesses.

Because of this many businesses accept credit cards and have merchant accounts with traditional credit card processors. Although it's fine to have one small business credit card as a means to keep track of your transactions, it's best to avoid having any other traditional credit card accounts at this point in time.

This is because you will have to wait quite a while for your merchant account to start earning right away and you will become unable to accept credit balance transfers.

While traditional credit card processor tenants are will able to provide you very high volumes of credit card transactions from day one, it might take you quite a while to receive the same incentive percentage. This could slow down the growth of your business.

When to Use Purchasing Cards

A business can make it easier for members to buy its products by offering credit cards. These are called purchasing cards. They require more information than co-branded cards but can offer lower fees because the card information is stored on the business’s own database. A business can take advantage of a purchasing card program to get the information it needs to get the best rates and terms available. And, by processing more than one kind of transaction, businesses can reduce the number of applications it receives and the costs it pays.

Whether used to buy supplies for the company or to give cards to customers, purchasing cards are a great way to market to business customers. Businesses that use the cards ask cardholders to provide their phone number and email address. From there, companies can text or email promotional information about the card or their business.

Using a credit card to help market to customers has a lot of positives for businesses. It allows companies to send exclusive promotions, offers, and sales to customers they know prefer to shop through a credit card. And these promotional cards have the ability to grow a business’s customer base. In fact, businesses that use credit cards to communicate with their customers can grow more than three times faster than those who don’t use a card.

When to Use an Alternative to a Small Business Credit Card or P Card

Small business credit cards and purchasing cards are complementary in that they both help your company to stay in business. A small business credit card or purchasing card is intended to help your company in two ways: (1) help you expand your business by providing you with cash flow and (2) buy accounts receivable, that is, assets that have a sell-order for a later day, in order to get cash now.

A small business credit card is a revolving line of credit that allows the borrower to obtain cash in exchange for a purchase order and cash advances against the purchase order which creates debt, creating cash flow. While a small business purchasing card allows you to draw down on your daily credit balance to cover your business’s daily expenses. So, in essence a purchasing card is the basis of a revolving account, where the purchased card balance is carried over from day to day.

They both have their own purpose, so it’s important to know the right time to use one over the other.

When to Use a Small Business Credit Card over a Purchasing Card

A purchasing card is very useful in its own right, however, when it comes to securing loans, working capital, and financing consumer goods, a credit card will come right at the top of your list of top choices.

How Small Business Credit Cards Work

The Small Business Administration defines a small business as having no more than 500 employees. Small businesses are usually deceptively large and making sure they have an adequate source of funding must be a top priority. In order to access capital, small businesses turn to loans, and one of the most popular ones is the small business credit card.

The Small Business Administration defines a small business credit card as one that is issued by a bank that specializes in small business loans, and it enables the small business to access capital and credit. Small business credit cards are available in a variety of forms, but generally fall into two categories:

Purchase Cards

Purchase cards are offers that focus on business merchants. These types of cards are typically branded for specific small or medium size businesses. The vast majority of purchase cards require the business to have a minimum monthly transaction amount in order to qualify for the card. They also offer incentives, such as discounts, cash back, and special rates on other merchant purchases.

The advantages of these cards include:

  • eliminating the need for a business to have a steady customer base to be a member of and qualify for a business credit card
  • enhancing brand awareness, especially for small businesses
  • saving on transaction fees for your business
  • providing the business with cash back rewards or discounts
  • Small Business Credit Cards

The advantages of small business credit cards include:

How Purchasing Cards Work

If you’re a regular reader of my blog, you’ve probably noticed that I’m pretty big on installment and reward cards. Why? Well this is just one of the many areas where purchasing cards out-shine small business credit cards. When you use a credit card whose network is predominantly composed of businesses, it’s important that you know the ins and outs of how such cards work. If you’re new to credit cards, you’ll need to learn a bit more before you’ll be able to take complete advantage of purchasing cards. So let’s take a look at how purchasing cards work.

Small Business Credit Cards vs Purchasing Cards Costs

Many businesses operate on a very tight budget and are forced to think outside the box to come up with unexpected ways of making their businesses successful. Often times this is achieved through finding a way to use credit cards for their business needs.

But there are two sides to credit card use … careful weighing of pros and cons before making a decision will help you achieve results that are best for your business.

The Pros of Using Business Credit Cards

Use business credit cards to build your credit score …

Business credit cards are a great way to establish a positive credit history. In fact, they are a better way to build up credit than using a personal credit card for business purchases because they are not reported to the three main credit bureaus. The account is, however, reported to the card’s issuing bank, which is generally a small independent institution.

Since your business is for business, your card shouldn’t show up on your personal credit report, which will only make your business credit score look better. If you think checking your own credit score is too much, you can also have your business finances handled by a trusted financial advisor.

Use business credit cards to take advantage of low interest rates …

Small Business Credit Cards Costs

When you look at the small business credit card it is reported that you need to shop around in order to get a great card that will meet your needs. There are no guarantees that an individual company offers a credit card that will meet your needs. That makes no sense. There are many opinions on this subject and some are more hostile than others.

The best small business credit cards are offered by the various banks. The banks offer some excellent cards that are tailored to meet small business needs.

Building your credit history is critical. I do not know how bad the credit problems your business may have are, but building a favorable credit history is critical to your credit future. Building bad credit is bad for your business and can lead to your credit line being taken away.

Once again everything depends on your financial situation. Business credit cards can offer you products, opening times, traveling to an event, discounts, rebates or much more. There are many cards out there that specialize in your saving a small business money, though there can be some stipulations in these programs.

You can draw on an instant credit limit or you can wait until you get a large credit limit from your business credit card issuer. You can always choose to carry a balance as long as you are able to make the payments. Remember this is all in the name of building a good credit record.

Purchasing Cards Costs

A purchasing card is a plastic card issued by a bank that acts as a debit card for purchases. They can be used to make purchases online, in a store, or at a retailer, and can be used wherever a debit or credit card is accepted.

They can be used by big businesses to make small purchases that a card reader couldn’t support. They’ve grown in popularity over recent years because having their bill paid in full each month is a little easier than paying a credit card bill in full each month.

While as of writing, the majority of businesses’ credit cards are either bare-bone cards or basic savings accounts that don’t attract interest, purchasing cards can come with a set of features that make them especially attractive to small businesses. That’s why purchasing cards are generally more expensive than a basic credit card.

Visa— a B2B Platform in Need of a B2C Rehab

Most business owners don’t need a large selection of business or corporate credit cards. Discover, MasterCard, and American Express each offer suites of cards. American Express provides a suite of business cards from which business owners can choose.

Small Business Credit Cards vs Purchasing Cards Rewards

The benefits and benefits of purchasing cards are very much the same. Because they are not marketed to business owners, there’s a chance you may not have heard of them. Nevertheless, they make an excellent alternative to a small business credit card because they aren’t tied to a single company or employer.

If you compare the two on an even playing field, purchasing cards have a clear edge.

Small Business Credit Cards Rewards

Many business owners need to have credit card for their business. They may need it to use for certain expenses. But maybe, they want a little extra cash back or maybe rewards points. If you are a business owner or just a regular consumer, you should know about small business credit cards.

Small business credit cards are similar to a standard retail credit card. While they are not widely available and not many folks that buy them. It can manage any business expenses that they have. Are they useful or not?

According to financial experts, it depends on what you need it for.

If you use the card for business expenses, then it will help you save you money. Business owners are often trying to get the most money out of their business. If they can do things to save them money. It will help you see your business grow.

But if you are looking to get cash back, then a retail credit card is what you are going to need. Retail credit cards are designed to give back cash back when you shop anywhere. They come with the extra perks and they are more expensive, but these are what will allow you to get the cash back.

Purchasing Cards Rewards

If you’re new to the world of credit cards, you’ve probably heard about credit card rewards. But just because you’re new to credit cards doesn’t mean you can’t take advantage of the great benefits credit cards have to offer.

There are two different types of cards that are available directly with a card issuer (or through a private label credit card portal): Purchasing Cards and Purchasing Rewards Cards.

Purchasing Cards are exclusively issued to business owners. The card has a primary debit card function and a bonus potential, often in the form of cash back or points in addition to the rewards program.

The card must be purchased through a credit card merchant processor, usually through an agency that offers card services on a commission basis. The purchase process can be complicated, and there are many pre-qualification, approval and reporting requirements.

Purchasing Rewards Cards are also offered to businesses, but the primary rewards program is built into the card. The card is issued either through the card issuer’s own merchant processor system or through a processor that is a member of The Merchant Card Integration Alliance.

Small Business Credit Cards vs Purchasing Cards Repayment Terms

When you consider the repayment terms of a Small Business Credit card you should hold you should think about how you want to use the card compared to when you'd consider an ordinary credit card. An ordinary credit card is usually linked to your personal credit and would allow you to spend on it, enjoy all of the benefits (such as rewards) which the card offers and then pay it off over a period of time of your choosing. You can usually have an unlimited credit limit when linking your personal credit rating to the card but often you have to keep a good record of your credit rating and make sure that you never go over your credit limit. The first thing which you should think about with a small business credit card is that the credit limit and interest rates are usually much lower, which is a bonus.

It is important that you keep your personal credit rating lower than your small business credit rating and to always make your personal credit card payments on time, so that no charge-offs are made on your personal credit and your credit rating remains low. As the repayment term is usually shorter, if you have any outstanding payments owing on the small business card, you should use it to pay for those off-balance-sheet assets. Over the period of time, you will build-up your personal credit rating while the charges on the small business card go away and at the same time your small business credit rating will rise.

Small Business Credit Cards Repayment Terms

Small Business Credit cards rather than your personal credit card are a great way to help a small business establish a credit history. If you run your own business, you know that it’s not always easy to get large loans that can help you start, run or expand your business without collateral. This is where a reputable Credit card is good option for the small business. A Small Business Credit card can be a great benefit in building good Credit history even though the interest rate will be higher than your personal credit card.

Most Small Business credit card Offers come with great features, most frequently that you will be able to pay down your card balance at a low interest rate. Some of the features may include:

  • Zero liability
  • Online and offline reporting
  • Fraud protection

No annual fees.

There is one huge benefit of the small Business Credit card solution and that is that your credit history is going to be built around your business transaction. This is great when you are getting applications for loaning money and/or credit cards loans. You will get a good credit history because all the transactions are going to be reported to the main credit bureaus. This will get your business going with the future loans, avoiding getting denied in the future.

Purchasing Cards Repayment Terms

Small Business Credit Cards vs Purchasing Cards Qualifications

There are many forms a small business card can take, but the two main ones are purchasing cards and credit cards. They are both great and can be extremely lucrative, but they are not for everyone.

Purchasing Cards – Purchasing cards are good for companies that have clients and suppliers abroad. These cards will also be of use to large companies with business internationally. Firms that are looking to sell their goods and services overseas may also consider these cards.

Credit Cards – Credit cards are not suitable for a small business that has little money to spare. The main purpose of a credit card is to purchase things with the intention of reselling them at a later date. Items purchased with a credit card are usually intended to help your business grow, so you must be careful when using one. However, there are many benefits to using a credit card.

Small Business Credit Cards Qualifications

There are a few things that you need before applying for a small business credit card. Submitting a credit application is pretty straightforward with few requirements so you must ensure that you have:

Credit History: If you’re looking to get a small business credit card to improve your credit score, you’ll need to look for a current credit history that is at least 3 months old.

Personal Salary: Most credit cards will ask to see your salary to determine your average expenditure and your monthly living expenses. If you’re just starting out and are not sure about your earnings, you will need to look for a job in order to prove you have a salary.

Credit Information: Your credit information will depend upon the kind of credit card you want to apply for. So if you’re wondering if you have a good credit score, you can check it through Equifax Credit Service or TransUnion.

Don’t forget to make sure that your credit card application forms are filled up accurately before submitting it. You must include all the details in the application form. If it is not completed correctly, your application will not be approved.

Purchasing Cards Qualifications

If you have dollars in the bank and you’re running a small business, it’s time to start thinking about business-related credit cards. But don’t just rely on cash and credit. Purchasing cards can help you save some money.

And as a small business owner, you’ve probably got bigger things going on that need your attention. Here at American Express Blue, we’re all about small business credit cards. We’ll give you a closer look at purchasing cards, the pros and cons, and talk about a few of the qualifiers you’ll need to have in order to qualify.

P Card vs Credit Card for Small Business: Ease of Use

Where did the idea of a credit card come from? A credit card originated as an instrument of exchange, which made it very appealing to non-customers. Imagine you just opened up a small business and are trying to figure out how to get people to visit your store. Visiting customers to your store is a great way to increase revenue while they also help spread word about your little business. But would you be nervous about telling customers to bring their own cash for purchases? Receipts are sure to go with them. If you own a small business, you’re probably asking yourself why you have to carry so many different checks given to you for your expenditures. The idea of credit card arose, and the checks became obsolete.

A credit card is used like a debit card. Your credit card information is used to access your account. You can use a credit card as case sensitive debit card. Both your credit or debit card can be reversed if you make a purchase and don’t have enough money in your account to pay. A credit card isn’t solely for payment and doesn’t depend on your paper checks. You can choose to use a credit card like a debit card or payment method.

A credit card gives you funds depending on your credit history. A debit card gives you funds depending on how much money is in your bank account.

Small Business Credit Cards Ease of Use

Small business credit cards are a great way to improve your business and boost your revenue. They can help you grow and expand your business and familiarize clients with your brand.

They are also simple, convenient, and can help businesses with managing their daily expenses.

Whether you want to purchase these cards is a completely different story.

Expensive and complex, purchasing a business credit card is a time consuming and sometimes nerve racking process. When you’re a new business, you don’t have enough experts and resources at your disposal, and even if you do, the process is too tedious, expensive, and complicated to even consider.

Quick, easy, and cost effective, the business credit cards available today make it simple to take advantage of these benefits.

Purchasing Cards Ease of Use

Purchasing cards are typically the card that only offers purchases and no rewards program. This type of credit card is typically best suited for someone who only makes relatively small purchases (groceries, gas, cell phone). For those who are making larger purchases, a small business credit card will be preferred over a purchasing card.

Business owners that will make occasional purchases that exceed their available credit should consider a purchasing card if they only have a small budget for the purchase. Purchasing cards do cost more than credit cards, but they are cheaper than business credit cards; which can cost up to 100… sometimes even more. For business owners who are interested in purchasing cards, but cannot afford the business credit cards, this type of card is a great option. You can utilize it by buying yourself small non-reoccurring items like paper, stamps, staples, etc.

A purchasing card can be used anywhere when purchasing a personal item or an item that typically is purchased in a department store where you can pay by cash or credit card. At gas stations, purchasing cards can only be used for gas purchases since gas purchases have to be completed with cash.

Purchasing cards allow you to make in-person purchases. A business credit card gives you the ability to use the purchase online or by phone.

P Card vs Credit Card for Small Business: How to Apply

There are several benefits that you get from having a business credit card, so why not take the plunge and apply for one. There are several types of business credit cards out there, but you’d be hard pressed to find a card that offers the same benefits to both businesses and individuals. In this section, we’ll talk about the differences between business credit cards and traditional credit cards and why you’d want to have one. This is also a good time to discuss the differences between the two and what separates business credit cards from purchasing cards.

Business Credit Cards vs Purchasing Cards

Business credit cards are typically not loans but an advance purchase of credit which is only offered to businesses. Businesses can use a business credit card to make payments and do the typical shopping that individuals would do. Business credit cards differ from purchasing cards with consumer cards often offering different rewards and perks. Purchasing cards offer several benefits for business owners. Below you’ll find a list of the benefits of having a business credit card:

No Balance Transfer Fees

Let’s say your business has just started and it’s trying to get off the ground. No retail business wants to spend money while building itself up, and a zero balance transfer fee credit card is ideal for building your business credit.

How to Apply for a Small Business Credit Card

Small business credit cards (also known as very small business credit cards) are originally designed for small and emerging business owners to borrow cash to help open up, expand, remodel, furnish, equip, or renovate their business. It is an excellent way for business owners to equip their business with the necessary cash needed to start out or attract additional business.

In essence, a small business credit card is a great tool for small business owners at the nascent stages of their growth with the hope of expanding it; as opposed to buying a large amount of inventory or capital equipment needed to expand their business.

Small business credit cards are useful for the following reasons:

  • credit card companies understand the good credit risk associated with little to no assets
  • credit card companies often provide business owners with higher credit limits to accommodate their business needs
  • credit card companies provide unlimited access to cash which is excellent for expanding a business
  • credit card companies often offer low rates on purchases as opposed to a loan
  • credit cards are a good tool for businesses making high volume transactions, since merchants accept credit cards rather than checks or large amounts of cash

How to Apply for a Purchasing Card

Pros & Cons of Small Business Credit Cards

Small businesses have a unique set of financial needs their businesses have. I dealt with these the first few years and a few months of my business. And I’m going to share the pro’s and con’s on my personal experience and see if it pertains to you. And if it does please don’t let my inexperience and stupidity get in the way of you making an educated decision on which way to go.

First of all, the few months of business was in retail and the retail business is extremely different than the service side. The best thing I ever did was to sign a contract with a very reliable credit card company that made sure the numbers were correct and up to par. And I got his down from 2.5% to 1.5% interest which is a big decrease. But like I said, for retail and service oriented business, you don’t just need to worry about one credit card. And that was a BIG mistake. For manufacturing you do need a credit card because of the reliability of the customer payment and you don’t pay the interest. But with retail customers you pay the interest.

Pros of Small Business Credit Cards

When you are a small business owner, you know the economic situation of this country is not helping to make things easier, but we do get by with an upper hand.

When it comes to credit, for small business owners the situation gets a whole lot tougher. Obviously, they need the credit but small business cards frequently fall victim to high interest rates and restrictive terms.

This is why small business owners need the perfect credit card to suit their needs, and what we have here is just that.

These credit cards are designed for small businesses with business owners in mind. They also offer specialized benefits that can help your business grow and develop and receiving the best rates from your business credit card and making your business credit cards are better than the others will make sure you have the upper hand.

Cons of Small Business Credit Cards

A small business credit card can be very beneficial for a business, but being a small business owner and applying for a small business credit card, there are some cons to be aware of.

As a business owner, most of your time and attention will be focused on the business rather than the cards. The cards are perfect for building credit so that in the future, you can apply for a business loan to take your business to the next level.

Pros of a Business Credit Card

  • Business owners often use credit cards to manage day-to-day expenses and then pay the credit card off in full each month. It’s a good way to manage small payments.
  • A lot of small businesses use a business credit card for expense control. By having one card for every expense from office supplies to lunches, they are able to keep track of expenses easily.
  • A business credit card can offer a business owner additional options. They might be able to use their card for business travel, memberships, and gas purchases.

Pros & Cons of Purchasing Cards

If you want to receive a statement credit or reward on purchases made with a credit/debit card, you can choose to purchase a pre-paid card or sign up for one of many credit cards that are available either through an online application or through a physical location. All of the credit card offers are designed for a variety of purposes, including for business, family, vacations, and other purposes.

Although purchasing a card usually involves some initial charge, the main advantages that come with being able to use the card without a monthly fee are:

{1}. You are able to choose whatever credit limit you want depending on the type of card you purchase … you can just keep the card in your wallet and use it any time you want.
{2}. You may be able to learn about new opportunities, and soon, will have significantly more available line of credit available for business.
{3}. When you purchase a business credit card, these are cards which have the most purchase and cash back benefits available with each purchase you make, making your buying process and the amount of money available for business expenses significantly more economical.

Here are some of the disadvantages of using a purchasing credit card:

Pros of Purchasing Cards

Vs. Small Business Credit Cards

If you’re looking to set up a new business, things can get real hectic real quick. You’ll need to do everything from researching business alternatives, to preparing and filing your LLC, to getting your new business’s website set up, to dropping everything and moving. In the middle of all of this, cash flow can be a real issue. Cash flow can be a real issue.

It makes sense then to use credit cards to make it easier on yourself and your business by allowing you to pay for business expenses. Purchasing cards from a bank can be intimidating. After all, banks aren’t exactly used to hearing from individuals with no credit history, and they’re definitely not used to hearing about a business. That’s why you’ll want to get in touch with a bank that’s more specific to small business credit cards instead of a general commercial bank. Here’s a look at some of the advantages to purchasing small business credit cards and what you can expect to get from them.

Purchasing cards are a great deal for the small business owner no matter what you’re in the market for:

Tiered Interest Rates

Cons of Purchasing Cards

A credit card purchase is also known as a merchant transaction, as you’re acting as a merchant when you accept credit cards as payment. This means that depending on your business size, credit card processing fees can either be substantial or can even push your business into the red.

Credit card processing fees vary widely from one processor to another and also depend on how much credit card transactions your business is processing. The larger your business is, the more expensive it is to process credit cards. That’s because in addition to processing the actual transaction, the processor will charge the merchant fees (also known as a merchant discount rate).

According to the Credit Card Processing Coalition, processing a credit card transaction can cost 47 cents per transaction on average, although this depends on the type of merchant accounts you’re using and the volume of your transactions.

Of course, there’s always the option to keep the credit card transactions to a minimum, if you can. But if you’re an independent business owner, you may be required to accept credit card payments. And if you need to accept credit card payments in order to compete in your market, you may have no other choice.

Differences Between Purchasing Card vs Corporate Card

When it comes to credit cards for small businesses, there are two main types to choose from … purchasing cards and corporate cards.

However, knowing the subtle differences between the two and between each of the two types of business credit cards can make all the difference.

Since purchasing cards are attached to a business’s checking account or savings account, business owners can use them for big ticket purchases and pay for their monthly expenses. In contrast, corporate cards are primarily used for business travel and other business expenses.

Here’s a bit more information about the differences between purchasing cards and corporate cards:

When you sign up for a purchasing card, you’re usually able to charge your company’s everyday expenses to it.

Since purchasing cards are attached to a company’s checking or savings account, business owners can use them to pay for big expense items and monthly expenses. Think about the main costs associated with running a small business … utilities, office supplies, and employee salaries. In this instance, since purchasing cards are connected to your account and are used for your everyday expenses, they’re considered to be much more transparent in nature than corporate cards.

The Bottom Line

As credit card processing gets more competitive, the fact that you can run your own credit card processing has become a competitive advantage. You now have more options for business credit card processing from matching, business credit cards that can be used by your customers, to purchasing cards to get a cut of the purchases your customers make.

With all of these options, I’m sure there’s something that will fit your bill.