Credit Cards vs. Debit Cards for a Small Business | Fora Financial Blog
Credit Cards vs. Debit Cards: What’s Right for Your Business?
May 25, 2018

Credit Cards vs. Debit Cards: What’s Right for Your Business?

As a business owner, you have many choices when it comes to almost every aspect of handling your finances. This is particularly true when it comes to choosing whether to manage your daily spending with a credit card or a debit card.

In fact, Wallet Hub lists more than a dozen credit card companies, and those are just the largest ones. However, before you can even look at credit card companies, you’ll need to decide whether it’s best to choose a credit card or a debit card for your business.

Although they seem similar at face value, credit and debit cards are very different. In this post, we’ll explain what you should know before choosing a credit or debit card to support your small business.

Credit Cards and Your Business

Credit cards allow you to borrow money from the bank. In return, you promise to pay the balance off each month. There are many types of credit cards that can be issued to your business, and each one offers different benefits. Standard credit cards extend a simple line of credit, whereas some cards offer cashback or rewards every time you spend.


Rewards can be an advantage when it comes to using a credit card for your business. If you use your credit card frequently and pay off your balance in full at the end of every month, those rewards can save you money in the future.

Security and consumer liability are another plus for credit cards. If you see something wrong and report it quickly, your responsibility for the loss is minimal.

Using credit cards is also a good way to build your business’s credit history. This is crucial, because establishing good credit will help you secure loans, obtain better interest rates, and much more.


Since credit cards are a form of borrowing money, you may accumulate debt and end up paying off expensive interest. In addition, facing a large credit card balance at the end of every month with insufficient funds to pay it off won’t be good for your business’s finances.

Annual percentage rates (APRs) can be quite high, so even if you pay the minimum amount that’s due each month, you’ll still pay interest charges, which will offset your card’s rewards.

Debit Cards and Your Business

With a debit card, you withdraw money directly from your bank account. In this way, using a debit card is very similar to using cash, since you can only spend an amount that you have in your bank account.


One of the best parts about using a debit card as a spending mechanism for your business is that you don’t have to pay interest. The funds come directly from your account, and there’s no borrowing involved, which means you won’t risk accumulating debt.

In general, debit cards incur no fees, although some carry minimal fees. For example, if you try to withdraw more money than the amount you have in your account, you could be hit with an overdraft fee.

Using debit cards is also a great way to avoid debt and control your spending habits. Since you’re drawing from pre-existing funds, it’s difficult to spend outside your means.


Security and liability concerns are a significant downside with debit cards. If a thief has your debit card and pin, they can drain your account in seconds. Since debit cards usually don’t have fraud protection like credit cards, it’s less likely that you’ll get your money back.

While some debit cards do offer cashback and rewards, most don’t have these perks. Moreover, these types of cards are rare, and often charge fees that make the offer less appealing.

Conclusion: What’s Right for You?

It’s difficult to give a definitive answer to this question because every business is unique. You must evaluate your own business needs and choose a card with advantages that outweigh the negatives.

If you’re disciplined with money and standing on solid financial ground, the credit route may be the way to go. However, if you’re not sure you can keep your credit spending down, start with a debit card.

If you’re uncertain about your decision, have someone you trust help you analyze the situation. However, if you know the facts in this article and weigh your options carefully, you’ll make the best decision for your business.

Fora Financial

Editorial Note: Any opinions, analyses, reviews or recommendations expressed in this article are those of the author's alone, and have not been reviewed, approved, or otherwise endorsed by any of these entities.

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Fora Financial is a working capital provider to small business owners nationwide. In addition, the Fora Financial team provides educational information to the small business community through their blog, which covers topics such as business financing, marketing, technology, and much more. If you’d like to see a topic covered on the Fora Financial blog, or want to submit a guest post, please email us at [email protected].