Small-business credit cards function much like personal credit cards. Both earn rewards and accrue interest in the same way, and annual fees on business and personal cards can be tax-deductible if the card is used for business expenses. But there are some key differences to keep in mind.
1. Credit reporting policies
Personal credit cards typically report card activity to the three major consumer credit bureaus — Experian, Equifax and TransUnion — and changes to your credit limit, credit usage and payment history (positive or negative) will impact your personal credit score. Small-business credit cards, on the other hand, primarily report to business credit bureaus and have little impact on your personal credit score. There are two mains exceptions to that rule:
If you're counting on a small-business credit card to boost your personal credit scores, consider a business card from Capital One or Discover, which report positive and negative activity for most cards to both consumer and commercial bureaus.
2. Credit limits
Small-business credit cards often come with more spending power than personal credit cards, giving your business more spending power. That could be especially useful if your business has steep operating costs — for instance, if you spend a lot on inventory each month.
Why the difference? Business cards consider both personal income and business revenue when determining your credit limit, while personal credit cards only consider personal income. Both types of cards also consider your personal credit score, among other factors like creditworthiness.
3. Rewards categories
Certain rewards bonus categories, such as travel and restaurant spending, are common on both personal and small-business credit cards. Others vary by card type.
Business credit cards are more likely to offer bonus rewards on phone bills, online advertising or office supplies, for instance. And for bonus rewards at grocery stores or drugstores, you might be better off with a personal card. Ultimately, the best deal depends on your business spending.
If your expenses are all over the place, a flat-rate rewards card that offers 1.5% or 2% back on all purchases could be a better option. This option is available for both personal and small-business credit cards.
4. 0% intro APR periods
Introductory 0% APR periods on personal cards are plentiful and tend to be quite long — often lasting 15 months or longer. Not so with small-business credit cards.
Consider a personal card if you’re looking for more time or options.
5. Tax and bookkeeping benefits
Business cards generally make it very easy to identify potential tax deductions. Many will give you an itemized report of your spending at the end of each year. Personal credit cards rarely offer such detailed reports.
Small-business credit cards make tracking and managing expenses easier in other ways, too. For example, most business credit cards offer free employee cards with customizable spending limits. On personal cards, such a feature is harder to find.
6. Consumer protections
Consumer protection laws, such as the Credit Card Act of 2009, generally don't apply to small-business credit cards. Even though most issuers extend consumer protections as a courtesy to small businesses, it’s a good thing to keep in mind since certain protections may not be available in every case.
Potentially, on a small-business card, your APR could change overnight, or you could be charged exorbitant late fees for small infractions. If you’re unsure about your issuer’s policy, call and ask.
Do you have to use a business credit card for business?
There's no law that says you have to use a business credit card for business expenses. It's OK to use a personal credit card — in fact, a personal card may be a better fit for some freelancers, independent contractors and other sole proprietors.
No matter what type of card you choose, it’s best to keep business expenses on one card and personal expenses on another. This makes it easier to file taxes and, depending on your business structure, can shield your personal assets if your company faces legal trouble.