Business credit cards can be something of a lifeline for small business owners, helping to cover critical expenses as they arise—while building credit to boot. However, as an organization grows, so will its expenses, which begs the question: How many business credit cards should you have?
There’s no one number that works for every business. It depends—specifically, on what your company’s needs are and how reliably you can pay off your credit card debt. There are upsides to carrying two or more business credit cards beyond the increased spending power, like sign-up bonuses and rewards programs.
In this article, we’ll discuss the most important considerations for using multiple business credit cards so you can decide how many you should have.
How many business credit cards can you have?
There’s no limit to the number of business cards you can apply for, but keep in mind that credit card applications typically trigger a hard inquiry on your credit report. This could impact your business credit score, especially if you apply for many cards within a short period.
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What's the 5/24 rule?
Some credit card issuers limit the number of cards they'll approve you for. Chase's unofficial 5/24 rule is probably the best-known example: Chase won't approve you for its cards if you've been approved for five credit cards within the past 24 months from any issuer. Other credit card issuers, like Capital One, outright limit the total number of credit cards you can have with them.
The best way to decide how many business credit cards you should have is to assess your financial situation and determine which cards best meet your needs. Remember, it's important to use your business credit cards responsibly and stay within your credit limits. Doing so will help ensure you get the maximum benefit from your credit cards and protect your business credit score.
Should you have multiple business credit cards?
Having multiple business credit cards can be advantageous for managing cash flow, organizing expenses, and earning perks—all important upsides for any small business. Additionally, having multiple credit accounts can increase your company’s total available line of credit, which can be useful in the case of emergencies or unexpected expenses.
However, managing these accounts responsibly is crucial to avoid falling into debt or negatively affecting your business's credit score. After all, American Express, Capital One, Chase, and the rest of the major business credit card issuers report to the same business credit reporting agencies.
Some small business owners might find that one or two cards are enough, while others might benefit from having several cards with different purposes and rewards programs. For example, if your small business has a lot of travel expenses, you might consider using a card with better travel rewards in addition to your primary credit card.
Factors to consider when deciding how many credit cards to have
Before deciding how many credit cards you should have, you’ll want to consider the following factors:
Credit score
Your company’s credit score is a major factor to consider when applying for multiple cards. According to Dun & Bradstreet, a business credit score of 80 to 100 is considered low-risk, which is generally a good credit score. A strong credit report will give lenders an indication of your ability to manage credit responsibly.
Debt-to-income ratio
Your debt-to-income (DTI) ratio measures how much debt your business has in comparison to your income. A higher DTI can make getting approved for multiple cards difficult, so keeping yours as low as possible is important.
Business size and revenue
The size and type of your business can also influence how many cards you should get. Larger businesses, for example, may be able to get approved for more cards than smaller ones. Additionally, your business revenue can be a factor in determining approval.
Credit utilization rate
Your credit utilization rate, also known as credit utilization ratio, is the amount of credit you use relative to the total amount of credit you have available. Generally, you should try to keep your credit utilization rate at around 30% or lower. This shows lenders that you’re managing your credit responsibly.
Credit history
A longer, positive credit history will make applying for business credit cards easier and may result in better terms or credit limits. The length of your business credit history should coincide with the age of your business, or at least the timeframe when your business first began using credit. Lenders will look for an established business credit history before approving multiple cards.
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When should I add another business credit card?
You should consider adding another business credit card to your portfolio once you’ve established a strong history of responsible usage with your first card. This means consistently making on-time payments, staying within your credit limit, and demonstrating financial stability. Having a solid track record not only strengthens your business credit score but also increases the likelihood of being approved for additional credit. This financial discipline shows lenders that your business can handle more credit responsibly, making it the right time to explore new options.
When adding a new card, it’s important to assess your evolving business needs. If your current card offers cash back on general expenses, but you anticipate travel in the future, a business travel credit card that earns points or miles could be beneficial. Similarly, if your business is growing and you often entertain clients, look for cards that offer rewards on dining and entertainment. A well-rounded portfolio of business credit cards should cover various spending categories that are essential to your business operations, helping you maximize rewards and take advantage of perks that reduce overall costs.
In addition to rewards, consider benefits that enhance your business efficiency. Some cards offer statement credits for services like cloud storage, software subscriptions, or travel programs. These features can provide significant savings, especially for growing businesses. Ultimately, adding another business credit card should be about filling gaps in your current card’s benefits while ensuring it fits with your business strategy, goals, and financial management approach.
Benefits and drawbacks of having multiple business credit cards
As with any financial decision, having multiple business credit cards has advantages and disadvantages.
Benefits:
- Spending power: An additional credit card increases the amount of credit you can use. Having more than one card can allow you to make larger purchases or spread out costs across multiple cards.
- Increased rewards: Many business credit cards offer rewards, such as cashback or points, for purchases made with the card. Having multiple rewards credit cards can mean more savings. Additionally, some cards offer a 0% intro APR, which could allow your business to make a significant purchase you can pay down over time interest-free.
- Building business credit: Multiple lines of credit can help build your business credit score over time. Using your cards responsibly by keeping your credit utilization rate low and making payments on time makes you more attractive to lenders and improves your profile with the major business credit bureaus.
- Greater convenience: With multiple credit card accounts, you won’t have to worry about running out of available credit when you need it most
Drawbacks:
- Extra costs: Managing multiple business credit cards can be expensive, as there may be additional fees and interest charges
- Higher credit utilization: Having multiple cards can increase your credit utilization rate, which could hurt your credit score if it gets too high
- More responsibility: Managing multiple cards requires careful planning to make sure you don’t miss payments or exceed your credit limits
Alternatives to multiple business credit cards
The best credit cards, especially those with high limits, typically require an excellent credit score. That puts some of these cards out of reach for many small businesses or new ventures. While you should probably have at least one credit card on hand to cover short-term business expenses and build business credit, consider some alternatives:
Small business loans
If you’re concerned about your ability to repay your credit card debt quickly, or if you’re looking to make a large, one-time purchase that would inflate your credit utilization ratio, consider a low-interest business loan. The average interest rate for small business loans is typically lower than the average credit card, and they often have lower eligibility requirements as well.
Business lines of credit
A business line of credit is a credit account that allows you to borrow funds up to a certain limit, repay them, and then access those funds again as needed. It functions similarly to a credit card but typically offers a higher credit limit, better interest rates, and lower eligibility requirements. While you won’t get the ancillary benefits of some business credit cards, like travel rewards, a business line of credit can be a great alternative, especially if you need a higher credit limit.
Tips for managing multiple business credit cards
While having multiple business credit cards can offer some benefits, sensibly managing them is key. Here are a few tips to help you manage your cards effectively:
- Establish clear spending limits: Decide in advance the maximum amount you’ll spend with each card. This can help you avoid overspending and minimize your credit utilization ratio.
- Pay your bills on time: Your payment history is a crucial piece of your business credit score. Missing payments can result in late fees, penalty interest rates, and a lower credit score. Establish a budget and payment schedule to make sure you make all your payments on time.
- Know the terms and conditions: Read through the terms and conditions before applying for a new credit card to understand the fees, rewards, and other relevant details
- Track your spending: Track all your purchases and payments to make sure you stay within your spending limits and budget
Manage all your cards in one place with Ramp
Whether your business uses one credit card or 10, Ramp can help you manage them all. With Ramp, you can easily keep track of all your business cards in one place and view updates in real time. Our comprehensive software combines corporate cards, expense management, bill payments, accounting, and reporting, streamlining your financial processes.
You can gain control over your spending with Ramp’s unlimited virtual credit cards, zero-touch expenses, and cashback rewards—all with no annual fees. Managing your business finances with our automated software saves companies an average of 5% annually.
