Guide to credit limits for business credit cards
When it comes to opening a business credit card, you may find you have a lot of options. One of the considerations that may be at the top of your mind when deciding is the credit limit for each card. Depending on your business, you may opt for a higher business credit card limit.
How do business credit cards work?
Business credit cards work a lot like personal credit cards in the sense that you charge purchases on the card, receive a statement at the end of the billing cycle and have to pay off at least the minimum balance per cycle. There are, however, a few differences — namely higher credit limits, tools to help businesses track and manage spending as well as different rewards and benefits potential.
Some business credit cards function as charge cards, like Ink Business Premier Credit Card, meaning the balance must be paid in full every month. Others allow you to carry a balance month-to-month like the Ink Business Preferred® card.
What is business credit?
Using a business credit card responsibly may help you increase or maintain your business credit. Businesses receive credit scores, just like individuals. This indicates a business' risk to lenders and determines your ability to borrow.
As a business owner, you may want to work on building good business credit to give you the ability to borrow money at the right time to grow your business or work through challenges. Paying off your business credit card balance in full every month can help.
So how are business credit card limits determined?
How are business credit card limits determined?
When determining the credit limit for a business, the card issuer may take a few factors into account. They will likely look at your business' credit score, revenue, history of repayment and current debt obligations. For new businesses that haven't had time to establish credit yet, lenders will likely look at the business owner's personal credit.
There isn't necessarily an average business credit card limit, as it varies greatly among businesses depending on type and size.
- How much of your available credit are you using monthly? If you're using close to all of your available credit each month, you may want to consider seeking a larger limit. This could help allow for more breathing room if your business encounters an unexpected cost.
- Are you paying off your balance in full each month? If you sometimes struggle to pay your balance off each month, you may want to consider not seeking a higher limit. This could lead to further debt and more interest.
How to increase business credit card limits
If you're wondering how to increase a business credit card limit, you'll generally start by requesting an increase from your card issuer. Showing your lender that you regularly use most of your available credit and can pay it off in full may encourage them to raise your limit. If you don't need higher credit every month but need it for a big, one-time purchase, you might also be able to request a temporary credit limit raise.
Business credit cards with no credit limit
While there are high limit credit cards available, there are also some business credit cards on the market that have no preset limit. This may be useful if you own a business with highly variable spending month to month.
This doesn't mean there's no limit to the amount you can charge, but there will likely be more flexibility. Lenders generally adjust the amount you can spend based on your purchase and payment history. Note, however, that not every single purchase may be approved. It's important to understand your card's terms and conditions.
Benefits to using business credit cards
There are a few benefits for businesses when they use credit cards:
- Build business credit: Using and paying off business credit cards can help grow your business' credit score, making it easier to obtain financing in the future.
- Separate finances: Having a business credit card helps keep clear lines between personal finances and business expenses.
- Earn rewards: Many business credit cards have rewards programs that you can take advantage of. For instance, the Chase Ink Business Unlimited® credit card rewards cardholders with 1.5% cash back on every business purchase. Rewards can be redeemed for travel, cash back, gift cards and more.
- Receive travel and purchase protections: Business cards can provide a variety of protections, such as purchase and extended warranties, cell phone protection or auto rental damage insurance.
In summary
Business credit card limits are highly personal to individual businesses. The best credit limit for your business may not be the same as another's, so it's important to consider how much you're spending each month and if you're able to pay it off when determining the right credit limit for your business.
