Business Credit Cards vs. Personal Credit Cards

Are you looking for a credit card for your small business but are unsure whether to choose a personal or business credit card? While they share similarities, understanding the key differences, like rewards, spending limits, consumer protections and employee perks, is essential to finding the best fit.

We’ll break down each card type’s benefits and drawbacks below.

What’s the difference between a personal and a business credit card?

While personal credit cards function similarly to business cards, there are some significant differences in the details. Personal credit cards are designed for individual use, while business cards cater to business needs, offering perks to match, such as grocery rewards on personal cards versus higher limits and rewards for office expenses on business cards. Both can impact your personal credit due to personal guarantees, but business cards also help build business credit with responsible use.

Pros and cons of business credit cards

Pros of business credit cards

• Higher spending limits than personal cards
• Specialized rewards for business-related categories like phone bills, office costs and online advertising
• Itemized end-of-year reports
• Employee cards with customizable spending limits
• Bigger welcome bonuses than many personal cards
• Contributes to building your business credit score

Cons of business credit cards

• Some issuers report to both credit bureaus and business credit score companies
• Consumer protection laws don’t apply
• Often requires a personal guarantee

Pros and cons of personal credit cards

Pros of personal credit cards

• Card activity is reported to the three major credit bureaus
• Boosted rewards in categories like grocery store and drugstore purchases for some cards
• Longer 0% intro APR offers than business cards
• Consumer protections guaranteed under the law

Cons of personal credit cards

• Lower spending limits
• Basic end-of-year reports on spending
• No employee card options

Are business credit cards only for business owners?

Yes, you need a business to qualify for a business credit card, but it doesn’t have to be a traditional, up-and-running business to apply. Freelancers or anyone earning income independently, like through lawn care or childcare, can apply as a sole proprietor using a Social Security number instead of an Employer Identification Number (EIN). You don’t need to have a registered LLC or corporation to be eligible.

Even if you’re just starting out and have upcoming business expenses, you may still qualify. The application process is similar to that of a personal card, but it includes business-related questions. For this reason, it’s best to apply only if you have a business or intend to start one. However, if you don’t have extensive business needs, a personal credit card may be the better choice.

Why choose a business credit card over a personal credit card?

Personal credit cards are consumer-focused and easier to qualify for, but business credit cards offer unique perks and benefits that can make them well worth the extra effort for business owners. In addition to dedicated business benefits and perks, there are plenty of other reasons why you might choose a business card over a personal card, such as:

• Better access to record-keeping tools
  

  Using a business credit card can help streamline your small business finances. Many business cards provide more detailed year-end spending reports than those from personal credit cards, and they often integrate with bookkeeping tools like QuickBooks, making tax preparation, deduction itemization and expense tracking easier.

• Build business credit
  

  Using a personal credit card for business expenses may be convenient, but it only builds personal credit, not business credit. Just like a poor personal credit score, a poor business credit score can close the doors to future financing opportunities. A business credit card helps build business credit, which is key to securing future financing success.

• Track employee spending
  

  Personal credit cards may suit solopreneurs, but if you’re handing yours to employees for purchases, it’s time to consider a business credit card. Many offer free employee cards, spending controls, and faster rewards earning. Some even include built-in expense reporting to streamline transaction management.

• Higher credit limits
  

  Business credit cards tend to come with higher credit limits than personal credit cards. A higher limit can provide more flexibility in the face of the steep operating costs small businesses can require. Yet a personal credit card might be best if you don’t need a particularly high credit limit.

• Separate business and personal finances
  

  Mixing personal and business expenses can create accounting headaches. Using a dedicated business credit card can make it easier for you to organize your business finances, help separate budgets and ensure all charges are clearly tied to your business, especially helpful for sole proprietors.

• More relevant rewards categories
  

  Think about your business spending habits. If you make recurring purchases, a business credit card with cash back rewards on categories like office supplies, phone bills or small-business marketing may be a good fit, as some even offer statement credits at retailers like Staples or Dell. For more varied spending, a flat-rate rewards card might be the better choice.

• Business-related perks
  

  When comparing business and personal credit cards, consider the perks. Personal cards often offer purchase protection, modest welcome bonuses and rewards at select retailers. Business cards, however, tend to provide more valuable benefits for business owners, like software credits, free employee cards, extended warranties and more generous welcome offers.

Why choose a personal credit card over a business credit card?

In some cases, a personal credit card may be the better choice over a business card. Here are a few reasons to consider choosing one over the other:

• Longer 0% intro APR periods
  

  Personal credit cards often offer 0 percent intro APR periods of 12 to 21 months on purchases and balance transfers, while business cards typically have shorter periods and often exclude balance transfers. If you’re not transferring debt, a long intro APR may not be needed, but it’s worth considering.

• Access to consumer protections
  

  Business credit cards aren’t covered by the Credit Card Accountability Responsibility and Disclosure Act of 2009 (CARD Act), so they lack some consumer protections. Before applying, review the card’s terms to ensure you’re comfortable with its protections. Luckily, some issuers do offer consumer-like safeguards voluntarily.

• You’re still building personal credit
  

  If you’re still building personal credit, qualifying for a business credit card may be difficult, as it often requires a solid credit history. While business card perks are appealing, it’s best to focus on strengthening your personal credit first. Many people start the process of improving their credit by getting a secured credit card.

• Your purchases don’t match typical business rewards categories
  

  If your business spending is infrequent or doesn’t align with typical business categories, a personal credit card may be a better fit. With rewards on gas, groceries, dining and retail, you could earn more using a personal card.

The bottom line

Choosing between a business and personal credit card depends on your financial situation and business needs. Personal cards offer perks like longer intro APRs, consumer protections and help with building personal credit. But if you’re self-employed or run a small business, a business credit card can help you build business credit, streamline bookkeeping and expenses as well as earn rewards on business spending. Whichever you choose, keeping business and personal spending separate is key — especially at tax time.