Getting the financing you need to start a business is hard. Securing additional investment when you’re ready to grow is even harder. Many business owners turn to business loans, but some don’t have the resume to entice a bank. As such, business credit cards are a promising capital solution for small business owners.
Whether you’re looking to grow your business quickly, score some rewards, earn travel points, or just have a resource for emergencies, business credit cards can be a big asset for your business. But getting a business credit card is not entirely without risk, whether you’re a brand new business or you’ve been around for a while.
Here, we’ll explore some of the most important statistics that define the business credit card industry today to help you better understand how it works and whether a business credit card may be right for you.
Although two-thirds of business owners have a business credit card, only 24% of them use it as a primary method of business spending. That helps explain why there is just $50 billion in outstanding debt on business credit cards. That’s less than 8% of all outstanding debt on general-purpose cards. 
When it comes to startup capital, 7% of small business owners use business credit cards, 13% use personal credit cards, 11% use personal assets, and 12% seek business loans. 
While just 7% of all business owners use business credit cards for startup capital, millennial founders are far more likely to do so. This suggests that the business credit card market will only grow as millennials make up a larger percentage of small business owners. 
More small business owners are likely to use business credit cards as a growth driver rather than startup capital. 89 percent of small business owners seek loans or lines of credit to grow, but business credit cards are the second choice. 
Nearly half of all business owners don’t realize that they have both a business credit score and a personal credit score. According to the report from Nav, 72% of business owners don’t know where to find their business credit score and 82% don’t understand how to interpret their score. 
Everyone should know their credit score. But it’s especially important for business owners to know their business credit scores because, if they don’t know it or don’t understand how it is calculated, they are much more likely not to be approved for a loan. 
Unfortunately, small business owners are still subject to arbitrary increases in the cost of debt. With a consumer card, credit card companies must wait until payment is at least 60 days delinquent to raise the interest rate on an existing balance. Business credit cards don’t have the same protection, so business owners often experience practically random interest rate hikes, making it exceedingly difficult to know exactly what they’ll pay in interest on the debt. 
According to a WalletHub study, 20% of business credit card issuers do not apply payments above the minimum required to account balances with the highest interest rate. This results in business owners paying higher amounts on high-interest accounts for longer, rather than paying down the principal on the highest interest-rate accounts whenever they make a payment above the minimum. 
Echoing the earlier point that many small business owners don’t know what they’ll ultimately pay for credit, 40% of business credit card issuers practice these almost arbitrary rate hikes. 
Even further emphasizing the issues with business credit cards, a fifth of issuers change key account terms without proper notice. All of this is to say: Do your research before getting a card. 
Finally, most business card issuers will report to customers’ personal credit reports. This makes it absolutely crucial that you pay business credit card statement balances on time; otherwise, it may damage your personal credit. Only Bank of America, Barclays, U.S. Bank, Citi, and PNC Bank do not report business credit card activity to personal credit reports. 
There is some good news for business credit cardholders! As of October 2020, the national APR average for business cards was about 14%, 2% lower than the average for general-purpose cards. 
Business credit cards can be a huge asset to business owners when they’re just starting out or when they’re ready to grow their business. However, they aren’t as heavily regulated as general consumer cards and, as such, may be subject to shady, harmful business practices. If you do take out a business credit card, do your research first and always pay off the statement balance in full every month. If you do, you may find your personal credit improves alongside your business credit.