Business Line Of Credit vs. Credit Card: Which Should You Choose?

We like business credit cards more primarily because of their rewards and benefits.

Couple running a business and researching business credit cards and lines of credit
Updated May 13, 2024
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We recommend business credit cards over business lines of credit for most small business owners. Business credit cards are sufficient to cover everyday small business expenses while providing valuable rewards and benefits.

A business line of credit may make sense in certain situations for high-spending businesses or for covering specific expenses, such as payroll. But as a small business owner, you likely don’t need a credit line worth hundreds of thousands of dollars. That’s why we think a business credit card can meet most small business needs.

Let’s explore our business line of credit versus credit card comparison to see how these two credit options work and help you choose the better financial product for your business.

In this business line of credit vs. credit card comparison

Key takeaways

  • We recommend business credit cards over business lines of credit because small business owners can take advantage of the valuable rewards and benefits these cards offer.
  • A business line of credit could provide over $500,000 in available credit.
  • Business credit cards typically provide less than $100,000 in available credit.
  • Business lines of credit don’t always provide rewards or additional benefits, while these perks are common with business credit cards.
  • You may have to pay interest on both business lines of credit and business credit cards. And they could both have additional fees, such as annual fees. Business lines of credit may also have origination fees, draw fees, and/or maintenance fees.

Business line of credit vs. business credit card

Business line of credit Business credit card
  • Provides revolving credit
  • May provide access to over $500,000 in credit
  • May carry interest
  • Can be a good option for a wide variety of business expenses, including payrolls
  • Doesn’t typically earn rewards or have additional benefits
  • Provides revolving credit
  • May provide access to under $100,000 in credit
  • May carry interest
  • May not be a good option for some business expenses, such as payrolls
  • May earn rewards and have additional perks and benefits

Our verdict

  • We generally recommend you use a business credit card because you can earn rewards on the purchases you make and take advantage of card benefits, such as purchase protection. Unless you need a much higher credit limit and/or want to cover specific expenses, such as payroll, a business credit card is likely the better option for you.

Check out the best small business credit cards.

What is a business line of credit?

A business line of credit is a small business loan option that provides an amount of money in credit form. You can borrow some or all of it from a lender, repay what you borrow, and borrow again.

This is similar to how credit cards work because you can borrow up to your credit limit to pay for eligible purchases. Depending on your business line of credit, this may include buying supplies, covering payroll, or paying for other expenses.

Remember
Interest can accrue on any credit you use with a business line of credit. And if you use credit, you’d be on the hook for paying back what you owe plus any interest. If you pay off what you owe plus interest, you could then use the total amount of available credit again.

Business lines of credit can be good for:

  • Building your business credit
  • Covering unexpected business expenses
  • Covering expenses where a credit card might not be accepted, which could include payroll
  • Improving the cash flow of your business
  • Separating personal and business expenses

How to get a business line of credit?

You can apply for a business line of credit at banks, credit unions, or other financial institutions. You typically have to fill out an application by providing certain personal and business information. This application is often available online.

The information you may have to provide includes:

Personal information Business information
  • Name, address, and phone number
  • Social Security number
  • Date of birth
  • Citizenship
  • Annual household income
  • Legal business name, address, and phone number
  • Business established date
  • Business tax ID
  • Ownership type
  • Gross annual revenue

Keep in mind
You may not always have the option to apply for a business line of credit online. In some cases, you may have to go through a virtual, over-the-phone, or in-person appointment with a representative.

If you need to have an in-person appointment for your line of credit application, it might help to call the financial institution in advance to ask about the documents you need to bring, whether that’s proof of your business revenue, personal income, or something else.

Business line of credit pros and cons

Pros Cons
  • May help you build your business credit score
  • May have a high credit limit
  • May have a low interest rate
  • May allow you to make various types of transactions
  • May require collateral
  • Typically doesn’t earn rewards
  • Likely doesn’t have additional benefits or perks
  • May come with origination, draw, and/or annual maintenance fees

What is a business credit card?

A business credit card is a type of credit card that’s meant to be used for business expenses. You can technically use business credit cards for personal expenses as well, but it may be against the terms and conditions of the agreement with your credit card issuer.

Business credit cards can make sense if you want to separate your personal and business expenses for easier bookkeeping and taxes. You can typically use business credit cards for many common business expenses, including gas, utilities, travel, and more.

Keep in mind
Being able to pay payrolls with a business credit card depends on your specific card and may come with additional fees.

Many business cards provide valuable rewards for making eligible purchases. This can include cash back, points, or miles that have varying redemption options, such as flights, hotel stays, or statement credits.

Business credit cards can be good for:

  • Building your business credit
  • Covering unexpected business expenses
  • Issuing employee cards
  • Improving the cash flow of your business
  • Earning rewards and taking advantage of card benefits
  • Separating personal and business expenses

Learn more about business credit cards and when you may need one.

How to get a business credit card?

The easiest way to get a business credit card is to apply for one online. As long as you have all the required information for the application, you may find out whether you qualify within a matter of minutes.

Keep in mind
A credit card issuer might need more time to process your application or gather more information in some cases. Learn more about using business credit cards for personal use.

Here’s the information you may need to provide on a business credit card application:

Personal information Business information
  • Name, address, phone number, and email address
  • Social Security number
  • Date of birth
  • Total annual income
  • Legal business name, address, and phone number
  • Years in business and number of employees
  • Federal tax ID
  • Company structure and industry type
  • Annual business revenue and estimated monthly spend

You may have the option to add employee cards during the online application process. This often involves choosing how many employee cards you want to add and then filling out specific employee information for each card. You may need some information, such as the employee's name and address.

If you’re starting a new business, check out our list of the best startup business credit cards.

Business credit card pros and cons

Pros Cons
  • May build your business credit score
  • May earn rewards and have useful card benefits and perks
  • May not require collateral as many business credit cards are unsecured
  • May have a high annual interest rate (APR)
  • May come with a low credit limit compared to a business line of credit
  • May have an annual fee

Which credit option is better for you?

We recommend choosing a business credit card over a business line of credit for most situations. But you might find that the right option depends on your specific circumstances.

When you should choose a business line of credit

  • You need a credit limit of $500,000 or more
  • You want to pay for specific expenses that a credit card might not be able to cover
  • You want to build your business credit

When you should choose a business credit card

  • You don’t need a credit limit over $100,000 (note that you might still be able to qualify for a higher credit limit, but it’s not common)
  • You want to earn rewards on your business expenses
  • You want to take advantage of card benefits, such as purchase, extended warranty, and/or cell phone protection
  • You want to build your business credit

What factors to consider before choosing

Business lines of credit can be helpful if you need a high credit limit or want to cover specific expenses, such as payroll. They can also help build your business credit history.

But keep in mind that you may:

  • Have to pay origination, draw, or annual fees when you get a business line of credit
  • Have to undergo scheduled reviews with your financial institution to see if you continue to qualify for a business line of credit
  • Not be able to earn rewards or take advantage of any additional benefits.

With a business credit card, you’re generally good to hold onto your credit card for as long as you want with an active account. So you know you have some extra cash flow for your business when needed. The advantages of business credit cards also include valuable rewards and benefits, and the opportunity to build your business credit history.

However, you may:

  • Not be able to cover payroll or other similar expenses (without additional fees) with a business credit card
  • Have a higher interest rate and a smaller amount of available credit compared to a business line of credit

That said, many small business owners would likely find business credit cards more than sufficient to cover common business expenses, while also providing rewards and benefits.

FAQs

Does a line of credit work like a credit card?

A line of credit shares several similarities with a credit card. Both credit options give you access to a specific amount of credit. You then have to make repayments, potentially with added interest, and you can use up to that same credit limit again. Both lines of credit and credit cards can be secured with collateral or be unsecured.

However, lines of credit may come with various upfront fees compared to credit cards. They also typically don’t offer rewards or cash back, while many credit cards do.

Does a business line of credit affect my credit score?

When you apply for a business line of credit, your financial institution may perform a hard inquiry on your personal credit that can lower your personal credit score by a few points. As you use your business line of credit, you may or may not see your activity reflected on your personal credit report, depending on your financial institution and how it reports to personal credit bureaus.

Can you get a business credit card with no revenue?

You may qualify for a business credit card even if your business is new and doesn’t yet have revenue. In this case, you could put “$0” as your annual revenue on your business credit card application. The credit card issuer might then take your personal income into account to decide your creditworthiness. It’s also possible to apply and potentially qualify for a business credit card with no credit.

Is it hard to get a line of credit for a new business?

Qualifying for a line of credit for a new business might be difficult, but it ultimately depends on the lender you work with. It’s common for financial institutions to look at how long you’ve been in business when determining whether you’re eligible for a business line of credit. If your business is too new, which might mean you don’t have exact revenue numbers, you might not be approved.

Bottom line

We think business credit cards make more sense than business lines of credit in most situations. Many small business owners don’t have a need for huge credit limits and can benefit from earning rewards with a business credit card. It also helps that it’s generally easy to qualify for business credit cards if you have a good or excellent personal credit score.

Explore our list of the best business credit cards for side hustles and compare credit cards to explore personal credit card offers.

Up to 5% Cash Back

4.8

Ink Business Cash® Credit Card

Current Offer

Earn $350 when you spend $3,000 on purchases in the first three months and an additional $400 when you spend $6,000 on purchases in the first six months after account opening

Annual Fee

$0

Rewards Rate

5% cash back on the first $25,000 spent in combined purchases at office supply stores and on internet, cable and phone services each account anniversary year; 2% cash back on the first $25,000 spent in combined purchases at gas stations and restaurants each account anniversary year; and 1% cash back on all other purchases

Benefits and Drawbacks
Card Details

Author Details

Ben Walker, CEPF, CFEI®

Ben Walker, CEPF, CFEI®, is credit cards specialist. For over a decade, he's leveraged credit card points and miles to travel the world. His expertise extends to other areas of personal finance — including loans, insurance, investing, and real estate — and you can find his insights on The Washington Post, Debt.com, Yahoo! Finance, and Fox Business.