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Business vs Personal Credit Cards: 6 Big Differences

Business vs Personal Credit Cards

Using credit cards is part of everyday life for most people. But if you’re an entrepreneur, you might be wondering if it’s better to use a business credit card as opposed to a personal credit card.  Here’s what to consider when deciding on business vs personal credit cards. 

Business credit cards and personal credit cards both give their users access to a line of credit, yet they don’t operate the same way. Knowing the difference between these two cards and knowing when to use each can save you time and money and ultimately could be extremely beneficial to your finances. 

Follow along to find out the six big differences between business and personal cards.

1. Credit Limits

Business credit cards generally have higher limits than personal credit cards. With personal cards, credit card companies determine your credit limit based on your personal finances. 

With business credit cards, the credit limit is based on several factors, including your business income, number of employees, and business credit history. For example, the Chase Ink Business Preferred card has a credit limit of at least $5,000 and generally less than $25,000.

If your business income is greater than your personal income, you’ll likely get a higher credit limit than on a personal card. A higher limit could be useful if your business has high operating costs.

The federal Credit Card Accountability and Disclosure (CARD) Act limits the amount of credit a consumer card issuer can offer to people with limited income or means.

As business credit cards do not fall under this law, issuers are free to extend higher limits.

2. Perks

Business and personal credit cards may differ in terms of benefits and perks. The focus of business cards is on providing useful business benefits and features, while personal cards are suited for day-to-day expenses.

With personal cards, you often get benefits like purchase protection and zero-liability fraud protection. 

Business cards generally offer additional rewards categories. In addition, they offer business-related benefits such as expense management controls or discount programs that can save your business money.

Business cards also allow you to get additional cards for your employees, and you can set spending limits or allow spending in certain categories. Business credit card companies typically offer account management tools to help you manage your business finances more effectively. Additionally, many business cards offer free access to airport lounges.

The higher a credit card’s annual fee, the better the benefits usually are. This applies to both personal and business credit cards.

3. 0% Intro APR

Although both business and personal cards may have promotional offers such as 0% APR, this is less common for business cards. In addition, personal credit cards generally offer promotional 0% APR for a longer period than business credit cards. While 0% APR introductory periods for personal cards often last 12 months or more after account opening on purchases and balance transfers, promotional periods for business cards typically last six to 12 months, and will probably only apply to new purchases.

A common question is whether or not a business can deduct credit card fees? The answer is yes. Credit card fees, such as interest rate fees and annual fees, are deductible for businesses but not for individuals.

4. Consumer Protections

Another difference between business credit cards and personal credit cards is how protected you are. Consumer protection laws are generally stricter with personal cards. For example, late fees on a business card can be much higher than on a personal credit card.

Personal credit cards are legally covered by the Credit Card Act of 2009. This provides additional protections for cardholders, including a no rate increase on most existing balances, a cap on penalty charges, and a notice of 45 days before a rate increase.

However, this law only applies to consumer cards, not business cards. Although some business credit card issuers have chosen to extend the consumer benefits outlined in the CARD Act to business cards, not all have done so. For this reason, before applying for a credit card, it’s important to carefully research the protections, features, and benefits it offers.

With a business card, your APR could potentially increase anytime. The new APR could be much higher than the original rate, making it harder to pay off the credit card balance.

Some business credit card issuers offer their own protections. However, you need to be sure to read the card agreement before signing up in order to protect yourself and your business.

5. Reward Categories

Business cards offer a variety of reward categories, many of which are targeted to business needs, such as office supplies, online advertising, and phone bills. Other categories, such as miles, are available on both card types.

Some bonus categories, such as travel and dining expenses, are common benefits to personal and small business credit cards.

But if you’re looking for rewards on groceries, you might be better off with a personal card. Ultimately, the best offer depends on your company’s expenses and what specifically your needs are.

If your spending is ubiquitous, a flat-rate rewards card that offers 1.5% or 2% back on all purchases might be a better option. This option is available for both personal and small business credit cards.

6. Credit Reporting

Every time you open a credit card account, your activity, including your payment history and balance, is reported to major credit bureaus. However, which agencies get your information depends on the type of card you have.

For personal credit cards, credit card activity is generally reported to the three major consumer credit bureaus: Equifax, Experian, and TransUnion. The consumer credit bureaus create your personal credit file from which your personal credit score is generated.

In contrast, the three credit bureaus for businesses are Dun & Bradstreet, Equifax Small Business, and Experian Business. The information recorded by these agencies is where your credit score comes from. There are also business credit cards that pull Equifax only, so that is an important fact to be aware of. 

Some small business credit card issuers report business activity to both consumer and business credit bureaus, which affects both your personal and business credit scores. Others simply report to commercial credit bureaus.

If you’re relying on a small business credit card to boost your personal credit scores, you’ll want to make sure you’re using one that falls under both consumer and business bureaus.

Featured Image: Megapixl

About the author: Stéphanie Bédard-Châteauneuf has over four years of experience writing financial content for various websites. Over the years, Stephanie has covered various industries, with a primary focus on consumer stocks, cannabis stocks, tech stocks, and personal finance. This stock lover likes to invest for the long-term. Stephanie has an MBA in finance.

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