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Small-business credit cards function much like personal credit cards. Both earn rewards and accrue interest in the same way. But business credit cards are designed to support the expenses of a company, not an individual.
It’s important to keep your business and personal finances separate. And while you technically can use a personal credit card for business expenses, make sure that whatever card you designate for your business, you use it only for business spending.
Here are the major differences between business and personal credit cards so you can choose the right option for your company.
» MORE: What is a business credit card?
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1. Business credit cards usually have higher credit limits
Small-business credit cards often come with higher credit limits than personal credit cards, giving your business more spending power. That could be especially useful if your business has fluctuating operating costs — for instance, if you spend a lot on inventory to stock up for the holiday season.
Why the difference? Business credit cards consider both personal income and business revenue when determining your credit limit, while personal credit cards only consider personal income.
2. Business credit cards may have more targeted rewards categories
Certain rewards bonus categories, such as gas, travel and restaurant spending, are common for both personal and small-business credit cards. But business credit cards are more likely to offer bonus rewards on spending categories like office supplies and online advertising.
If your expenses are all over the place, though, a flat-rate rewards card that offers cash back on all purchases could be the best choice. This option is available for both personal and small-business credit cards and works the same way in both types of cards.
Some personal and business cards have rewards caps — for instance, offering 3% cash back up to a certain amount spent, then 1% after that. Business cards typically set these caps higher to account for companies’ larger expenses, allowing you to earn more if you spend more.
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3. Business credit cards can help build your credit score
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 your card activity to business credit bureaus. This affects your business credit score, but usually has little impact on your personal credit score.
There are two main exceptions to that rule:
- Most business credit cards rely on your personal credit score to determine approval. The hard inquiry may result in a small, temporary hit to your personal credit score.
- Business card issuers sometimes report negative activity to consumer credit bureaus, so late payments and serious delinquencies can lower your personal and business credit score.
» MORE: How to build business credit
4. Business credit cards may offer spending controls and other bookkeeping benefits
In general, keeping your personal and business finances separate is a must. First, it makes bookkeeping much simpler, since you won’t have to detangle your business and personal expenses. Depending on your business structure, it may also shield your personal assets if your company faces legal trouble.
Small-business credit cards come with features that make tracking and managing your business expenses easier. For example, most business credit cards offer free employee cards with customizable spending limits. Personal credit cards are designed with one person or household in mind, which means they have little need to offer those kinds of features.
5. Consumer cards tend to offer longer 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.
That’s not the case with small-business credit cards. While there are a handful of business credit cards with introductory 0% APR terms, they tend to be shorter and often just apply to purchases, not balance transfers. (Though there are a few business credit cards that offer 0% APR for balance transfers).
6. Personal credit cards have more 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.
For instance, on a small-business card, your APR could potentially 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.
What business and personal credit cards have in common
Here’s what the two types of credit cards share:
- Most require a personal credit check. Credit card issuers want to make sure you’ll pay back the money you borrow, whether you’re doing it for personal or business spending. Corporate credit cards are the exception — but those are usually only available to large companies with venture capital funding or millions of dollars in annual revenue.
- You're personally on the hook for repayment. With personal credit cards, that's probably clear. But business credit cards usually require a personal guarantee — a promise that you’ll repay what you borrow even if your business can’t. If you’re looking for a business credit card with no personal guarantee, you’ll likely need a corporate card.
- Both can be used for business expenses. There’s no law against using a personal credit card for business spending, and annual fees and interest on either can be tax-deductible if the card is used for business expenses. A personal card may even be a better fit for some freelancers, independent contractors and sole proprietors. But whichever you choose, make sure the card assigned to your business is only used for business purchases, not personal ones.
