How are business credit card limits determined and how can I increase mine?

Running a small business and looking for a credit card? There are tons of options available for you. One of the things you might want to think about is the amount of the credit limit. Some businesses might want a bigger credit limit.

Business credit cards generally work exactly the same as personal credit cards in that they let you charge purchases, they send you a statement at the end of a billing cycle, and you have to pay a minimum payment. The differences are often in how high the credit limit is, business-focused spending management tools, and rewards and benefits specific to business owners.

Some cards, such as the Ink Business Premier Credit Card which has an annual fee, are “charge cards” you must pay the balance off every month. Others, such as the Ink Business Preferred card, let you carry a balance month to month.

You can use the card to build business credit history. A business has a credit score just like you do. The score tells lenders how big of a credit risk you are - and how much money you can borrow.

It’s a good idea to build a good business credit profile as a business owner. A strong business credit profile can help you down the road in the future when you need to borrow money to grow your business, or to help you through a rough patch. Using the card and paying the balance in full every month can help build credit.

Credit Limits

How do issuers set credit limits?

The issuer looks at a combination of factors, most likely your business’s credit score, business revenue, payment history, and outstanding debt. For a business without an established credit score, the issuer may also look at the owner’s personal credit.

Unfortunately, there is no “typical” or “average” limit. Business cards can vary a lot in their credit limits depending on the type and size of the business.

To decide whether you need more, ask yourself: do you use all, or most of your available credit limit every month? If you do, a higher limit may help. It gives you more breathing room if an unexpected business expense arises.

Another question to ask yourself is, can you pay off the card in full every month? If you struggle to pay the card off completely each month it’s probably not a good idea to request a higher limit, because more credit could mean more debt and more interest.

If you want a higher limit, the first place to start is your card issuer. You can just ask for an increase. Using the card a lot - but paying it in full every month - helps your chances. Some card issuers may be willing to increase your limit temporarily for a large purchase, too.

Some business credit cards don’t even have a preset spending limit. These may be the right card for a business whose spending fluctuates from month to month.

A no preset limit card doesn’t mean you can buy anything you want. It just means that the card is more flexible. Lenders generally base how much you can spend on your purchase and payment history, so not every purchase will go through. Make sure to read your card’s terms and conditions.

Benefit to Using a Business Credit Card

There are several advantages that a business can get from using a business credit card.

One advantage is building credit. Use the card, and pay the balance off every month.

Another benefit to using a business credit card is separating spending. It lets you keep your personal expenses separate from business purchases.

Third, there’s rewards. Many business cards come with a rewards program. You might be able to redeem rewards points for things like travel, cash back or even gift cards.

Last, there’s protection. Some cards come with other protections like purchase and extended warranty protection, cell phone protection or rental car damage insurance.

Ultimately, the ideal credit limit is going to be different for every business. It depends on things like how much you want to spend per month, and how much you can realistically pay back.