Know the Difference: Business vs. Personal Credit Cards


The global economy and the expanded reach of the internet has proven to be fertile soil for new businesses, presenting an ideal opportunity for aspiring entrepreneurs to launch startups. One thing that every business will need is access to capital to cover company expenses. It is almost always necessary for businesses to establish a line of credit to cover inevitable costs. One way that small businesses and startups approach this need is by acquiring a credit card to cover expenses. Some business owners choose to use a personal credit card, while others choose to acquire a business credit card for their business expenses. There are some distinct differences between a personal credit card and a business credit card that business owners should be aware of.

Small Businesses Don’t Qualify for Consumer Protection

When using a personal credit card, the user is protected from certain risks by the Credit Card Act of 2009; ensuring that there will not be any unfair changes in interest rates; however, small business owners are not protected by this act. Fortunately, many credit card companies will extend consumer protection to small business owners. The key is to find the card issuer that will offer the best protection package.

Because of this extended courtesy to small business, the vast majority of business owners will not be impacted by this potential risk; however, it is important for small business owners to be aware of this so that they are able to make sure that they acquire a business credit card that will help to meet their needs, while providing the best possible protection. One way for a business to ensure that they get the business credit card that is best suited for their business is to use a third-party credit card service to locate the best card for them.

Separate Lines of Credit

When a small business owner applies for a business credit card, the initial inquiry will count against their personal credit report; however, the lines of credit will be exclusive to one another. In other words, once the business credit card account has been established, that credit accrual and the payment history will be completely separate from the personal credit and payment history of the owner. The credit card issuer will use the business owner’s personal credit score to determine payment history and dependability, but the account will be set up under the business name. What this means is that a large credit card balance on the business card will not negatively impact the owner’s personal credit score, in most instances. There are some credit card issuers that will report the payments on both accounts.

Benefits that are Tailored Toward the Business

When acquiring a business card, the rewards programs associated with the card will likely offer rewards that will be business based, as opposed to rewards that are more centered on personal interests. For example, most business credit cards will provide cash back points for office supply purchases, and other business related purchases. Another business-related benefit that is worth mentioning is that many credit card issuers will offer sign up bonuses for a business that are not normally offered to individuals who are applying for personal accounts. Additionally, it is possible that the annual fee on a business card could be significantly higher than that of a personal credit card; however, there are many credit card issuers that will waive the annual fee for the first year, in order to give the business time to get up and moving in the right direction.

Higher Credit Limits

While this is not always true, generally speaking, business credit card accounts are opened with a higher credit limit. This is due to the fact that the expenses associated with funding a startup can be incredibly high. If a business owner anticipates making a significant number of business purchases, it is definitely in their best interest to open a business account. Another area in which a high credit limit is beneficial is that a business owner can make more purchases, but because of the higher limit, while using less of their overall credit limit, which will have less of a negative impact on their overall credit score.

It is important to understand the differences between a personal and business credit card. While a business card may cost a bit more to maintain, considering annual fees, business cards will have more lucrative category bonuses and rewards programs that will prove highly beneficial to the business. What is important is that the business owner takes the time to choose the business credit card that is suited to the way that they do business.

Thomas Holland has been a business finance advisor for 15 years now. Along the way he has seen some costly mistakes made and has taken to writing for business blogs in an effort to help business owners by sharing his knowledge.