Business credit cards vs. personal credit cards: How do they differ?
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BLUEPRINT
Published 6:24 a.m. UTC Dec. 12, 2023
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Small business and personal credit cards serve similar purposes. You can use either type of card to make purchases, earn rewards and receive cardholder protections. There’s no interest if you pay your bill in full every month, and relatively high interest rates if you don’t. However, it’s important to know the differences, particularly if you just started a business and are unsure which card type to use.
How business credit cards differ from personal credit cards
The big difference between business and personal credit cards is that business owners apply for and open business credit cards in the company’s name, often using the business’ Employee Identification Number (EIN). While personal credit cards are opened in your own name using your Social Security number.
Credit card issuers also create business credit cards to appeal to small business owners, rather than individuals. As a result, many of the day-to-day differences come down to the features, rewards and benefits that the different types of cards offer.
Ink Business Unlimited® Credit Card
Rewards categories
Business credit cards might offer rewards categories that align with popular business purchases, such as:
- Office supply stores.
- Online advertising.
- Shipping.
- Internet and phone services.
Where personal credit cards often have bonus rewards categories that are more likely to align with the spending patterns of an individual such as:
- U.S. supermarkets.
- Gas stations.
- Restaurants.
- Streaming services.
There are also both business and personal credit cards with flat-rate rewards, such as 1.5% or 2% back on purchases. But no matter the rewards structure, you’re more likely to find an annual spending cap on the rewards categories with a business credit card than a personal card.
Employee cards
Many small business credit cards also allow you to request free employee credit cards for your staff. Employee cards can make managing business expenses easier because you won’t have to handle reimbursement requests. You also can quickly review employees’ purchases and manage their cards’ spending limits. Plus, you get the rewards for all the employee card purchases.
Personal credit cards allow you to add authorized users, but that’s not quite the same thing. You can’t set spending limits and at most banks authorized users have the same card number so you can’t easily see which card was used for a transaction. You will earn rewards for the spending from your authorized user.
Cardholder benefits
Business cards may offer statement credits on certain business-related purchases. For example, the American Express® Business Gold Card * The information for the American Express® Business Gold Card has been collected independently by Blueprint. The card details on this page have not been reviewed or provided by the card issuer. (terms apply) offers cardholders up to $20 in monthly statement credits (up to $240 annually) that can go toward eligible U.S. purchases at FedEx, GrubHub and Office Supply Stores (enrollment required).
Meanwhile, personal cards offer perks that are appealing to individuals. For example, the American Express® Gold Card (terms apply) automatically gives you $10 in Uber Cash each month (up to $120 annually) for Uber Eats orders or Uber rides in the U.S. if you add your card to your Uber account.
Business cards may also have higher limits or fewer restrictions on purchase-related perks, such as purchase protection, than personal cards. For example, the Chase Freedom Unlimited® offers purchase protection up to $500 per claim and $50,000 per account. While the Ink Business Unlimited® Credit Card offers purchase protection up to $10,000 per claim and $50,000 per account.
Credit reporting
Business card issuers may report a card’s information to the Small Business Financial Exchange (SBFE), which collects credit information and shares it with credit reporting bureaus and directly to business credit bureaus, such as Dun and Bradstreet (D&B), Equifax and Experian. The latter two may be familiar names as they are also consumer credit bureaus, but the companies keep the business and personal credit history files separate.
Personal credit cards only get reported to the consumer credit bureaus (Equifax, Experian and TransUnion) and only affect your personal credit. Sometimes, your business credit card will also be reported to the consumer bureaus and affect your personal credit. But check with the card issuer to learn about its policies.
Similarities between these types of cards
Although there are differences between business and personal credit cards, they largely work the same way:
- Your personal credit matters: Even if the card issuer doesn’t report your business credit card to the consumer bureaus, your personal credit can impact your ability to get a business credit card or a personal credit card. If you don’t have good credit, you may want to start with a secured business or personal card.
- Grace period: You generally won’t accrue any interest if you pay your credit card statement balance in full every month. Card issuers also offer grace periods on personal and business credit cards, giving you about three weeks between the end of your statement period and the bill’s due date.
- Bonuses and rewards: You can find welcome bonuses and ongoing rewards with either type of card.
- Zero liability protection: Even if it’s not legally required, many small business credit cards offer zero liability for unauthorized transactions.
- Personal liability: Although you aren’t liable for unauthorized transactions, you still have to pay off your balance. Many small business credit cards also require a personal guarantee, meaning you’ll be personally liable for the card’s balance.
- Fees: Credit cards can have many types of fees, including annual, late payment, balance transfer and cash advance fees.
Business credit card vs. personal: Which is right for your small business?
If you have a registered business entity, such as a limited liability company (LLC) or corporation, then you will likely want to open a business credit card in the company’s name. Keeping your business and personal finance separate can be an important part of limiting your personal liability. And the best business credit cards may offer perks that align with your company’s expenses and needs.
However, if you run a sole proprietorship — the default if you started your own business or a side gig and didn’t create a new business entity — then your business and personal finances are already intertwined. You might want to use a separate credit card for all your business expenses to make it easier to track these for tax reporting purposes. But you could use a consumer or business card as your business card.
It’s not illegal to use a business credit card for personal use, but it might be against the card issuer’s terms and conditions.
Of course, mistakes happen, and if you occasionally use a business credit card for a personal expense it probably won’t be an issue. But the card issuer might close your account if it suspects you got the business card for its rewards or benefits and are using it as a personal card.
Additionally, using a business card for personal expenses could commingle your business and personal funds. As a result, your personal assets may be at risk if a creditor sues your business.
Using a personal credit card for business expenses can commingle your finances. It’s not a problem if you have a sole proprietorship because your finances are already blended. However, if you have an LLC, corporation or partnership, separating your finances can be important for protecting your personal assets from your business’s liabilities.
Business credit cards may offer business-specific perks and benefits. For example, you might be able to request employee cards for your staff and receive bonus rewards on common business purchases, like shipping and online advertising.
The main downside is that business credit cards tend to have higher interest rates than other types of business financing.
Personal credit cards can be helpful if you want to earn rewards and benefit from the various cardholder protections and perks. Responsibly using a credit card can also improve your credit score.
However, credit cards tend to have high interest rates and the interest will generally accrue daily once you start carrying a balance.
Building personal and business credit can both be important. Your personal credit can affect your options and offers when you apply for a personal loan, credit card, auto loan or mortgage. It can also affect your insurance premiums, job opportunities and housing options. And a small business owner’s personal credit can impact their small business financing options.
Business credit can be important because a business’s credit report is completely separate from the owner’s personal credit. A company might qualify for better financing if it has a good business credit history and business credit scores.
*The information for the American Express® Business Gold Card has been collected independently by Blueprint. The card details on this page have not been reviewed or provided by the card issuer.
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