How many business credit cards should you have?

A business credit card can help you manage expenses and cover the costs associated with purchasing supplies or scheduling services. The question is, should you have multiple credit cards?

If one business credit card is good, then having several credit cards is even better, right? Not necessarily. 

There isn't any magic number of credit cards or a single credit limit that is right for every company. Instead, you should consider the pros and cons of additional business credit cards so you can decide how many are right for your situation.

Should you own multiple business credit cards?

Having multiple business credit cards can be advantageous, but it's essential to consider whether it's necessary for your specific business.

Just like filling out a lot of personal credit card applications can harm your individual credit score, applying for more than one card for your business can impact your company's credit score. On the other hand, as long as you are making payments on time and not pushing your spending limits, managing multiple business lines of credit and cards can help build business credit in the long run.

Missing payments or using a high percentage of your credit limits will lower your business credit score. It's important to consider your spending patterns, cash flow projections, and ability to keep up with separate cards before getting a business credit card.

How many business credit cards should a business have?

The ideal number of business credit cards depends on the size and nature of your company. Smaller business owners may benefit from having two to three cards, while larger businesses might need more cards to allocate to different departments or project-specific spending. For instance, each team may have a separate card so that the accounting department can easily track business expenses and attribute them to specific purchases.

How many employee cards should I have?

Once you’ve established how many business credit cards your company needs, the next step is to consider how many of those cards, if any, should be issued to your employees. Employee credit cards can simplify expense tracking by allowing your team to make authorized expenses without the hassle of reimbursement.

Issuing employee cards can streamline expense management and make it easy for your team to purchase eligible goods like rental cars and lodging at hotels. However, not everyone needs a credit card. If you operate a larger business with multiple departments, you might need a separate card for each team. In contrast, with smaller organizations, you may only need two to three credit cards.

Shared credit cards can be risky, especially for smaller businesses. If you and your employees share cards, it can be tough to distinguish who made which purchases. Frequently passing a business credit card back and forth also increases the risk that it will get lost. Using separate business credit cards for each person or team is critical so you can track and categorize expenses.

You do, however, need a way to track your multiple employee credit cards. You should know which member of your team is assigned each card and require them to provide receipts for any authorized purchases.

Benefits of having multiple business credit cards

Here are a few of the advantages of having multiple cards for your business:

Expense segmentation

A credit card can be a great tool for dividing your transactions into different spending categories. You could use a separate card or credit line for each type of expense. For example, you could buy office supplies with one card and cover travel costs with another.

Multiple cards are also useful for tracking equipment-specific costs. For instance, if you assign each vehicle a fuel card, you will be able to document how much each driver is spending on gas each month.

Increased credit limits

Credit cards can increase your spending power and make it easy to access business funding in a pinch. However, you don't necessarily have to manage multiple credit cards to increase your spending limits.

Remember that each card application will involve a hard inquiry and be listed as a separate line item with business credit bureaus. You'll also have to take on a separate annual fee for each card.

To avoid these potential drawbacks, consider secured business credit cards. You have to offer cash to open the account and maintain a minimum account balance to remain in good standing with the lender. The credit limit will likely be much higher than the amount of cash you put forth, but the lender will have peace of mind knowing they are at least partially protected from default.

Improved cash flow

A business credit card can also help you maximize your cash flow. You can stagger the billing cycle and annual fee for each card to avoid incurring major expenses all at once. For example, let's say you have four business credit cards. You could pay one each week of the month to keep your total outgoing costs low.

Cards can also be valuable for covering unexpected expenses. Suppose that you encounter a major fleet vehicle repair cost but won't receive any significant customer invoice payments for another two weeks. In this situation, you could pay for the repairs with the card to avoid tapping into the company's savings account.

Rewards and benefits

Using multiple cards gives you a chance to enroll in several credit card rewards programs. You can take advantage of an introductory period with a low interest rate, plans without an annual fee, and cash-back options that allow you to earn rewards on qualifying purchases.

Bonus rewards and card features like no annual fee can add to the value of having multiple lines of credit. When enrolling in more than one rewards program, focus on perks that will help you meet the specific needs of your company.

For example, a card with no interest for 12 months after you open your account can be used to consolidate high-balance accounts. Consolidating near your spending limits could improve your credit report and save you thousands in interest payments.

Emergency backup

Cards can also offer an emergency backup if you encounter a surprise expense. If one credit card doesn't have the limit necessary to pay for it, you could split the cost among more than one line of credit. This flexibility can be extremely valuable for a business owner.

Drawbacks of having multiple business credit cards

There are a few downsides to having more than one credit card, including the following:

Complex financial management

Keeping track of multiple credit lines, minimum payment due dates, and card balances can quickly become challenging. Tracking each business credit card can be especially challenging if you are using spreadsheets or manual processes.

If you decide to obtain more than one credit card for your business, explore ways to automate financial management. Doing so will save you countless hours and reduce your risk of missing payment deadlines.

Higher risk of debt

All those credit card bills will come due eventually. If you aren't careful, you could find yourself facing tens of thousands in unsecured debt and overwhelming monthly payments. Use your cards as tools rather than excuses to make unnecessary or misguided purchases.

Consider how much you can afford to repay. Use low-interest cards first, saving higher-interest accounts for emergencies. When possible, offer cash payments for business expenses so you can maintain financial flexibility.

Annual fees

Business credit cards often come with annual fees. These fees will vary depending on the size of your business, the type of program you are enrolled in, how many cards you have, and several other factors.

Business card fees typically range from as little as $0 to several hundred dollars per year. Accounts with higher fees usually include more rewards as well, so consider the trade-offs of each option when signing up for a card.

Impact on credit score

Each time you take on a new card, your business credit score will be temporarily dropped. In the long run, having a higher available credit limit can boost your score. However, overusing your cards and maintaining high utilization rates will drive your score back down.

Spreading charges over multiple cards can keep your utilization rate lower. In turn, a lower utilization rate may mitigate the impacts on your credit score.

Potential for fraud

Keeping track of many cards and accounts may prove tedious, especially if you are sharing them. A lack of oversight opens the door for lost or stolen cards, abuse by unscrupulous employees, and the potential for fraud. A single incidence of fraud could leave your cards maxed out and require months to resolve.

How many credit cards are too many for a business?

There's no one-size-fits-all answer to how many credit cards are too many for a business. If managing more than one business credit card becomes burdensome, it can lead to financial oversights and debt.

Racking up considerable debt on a business credit card or missing minimum payments can reflect poorly on your business credit history. A negative credit history will in turn make it harder to get business loans or other funding in the future.

Here are a few signs that having multiple business credit cards has become a burden for your company:

• You've missed payments
• Your business has poor credit
• You are near or at available credit limits

If any of this sounds familiar, it may be time to focus on building business credit and reducing your reliance on cards.

An alternative solution: BILL Spend & Expense

BILL Spend & Expense is an excellent alternative solution to getting multiple business credit cards for your employees. BILL elevates your expense management capabilities through various add-on offerings, including the BILL Divvy Corporate Card*, which you can provide to authorized employees. 

You can separate cards and transactions into different budgets using our virtual tools, making it easy to categorize and track multiple types of expenses. It's free to use and can provide real-time visibility into expenses, transactions, and more.

Countless clients have benefited from BILL Spend & Expense. For instance, Blumer & Associates uses BILL to make payments for clients and eliminate internal expense reports. The firm reports that BILL allows its clients to maintain better visibility over transactions and make informed spending decisions. Leaders also say their clients are "blown away" by BILL's capabilities.

Artemis Health has also used BILL to modernize its spending, expense tracking, and accounting processes. The healthcare software company has used BILL Spend & Expense to streamline its credit card processes and close its books faster.

As a smaller "shop," Artemis appreciates BILL's scalability. The company's controller immediately saved a few hours per month because of Spend & Expense. He expects these savings to increase as the company grows.

Ready to experience your own BILL success story? Check out BILL credit solutions today and rethink the way you manage business expenses.

‍*The BILL Divvy Corporate Card is issued by Cross River Bank, member FDIC.