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Business credit cards are essentially meant for businesses. While they function like personal credit cards in most ways, differences come in the form of the information you need to provide when applying, the way they report to credit bureaus, the need for personal guarantees and their reward structures.
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Key Differences Between Business & Personal Credit Cards
Most business cards are meant for use to cover business-related expenses, and they come with business-specific rewards and features. While you may use a personal credit card to pay for business expenses and make all or part of its annual fee tax-deductible (depending on the proportion of business-specific spending to the total spending), using a business card makes the entire annual fee tax-deductible.
- Is the application process the same?
Applications for business credit cards tend to require much of the same information that you need to provide when applying for a personal credit card, such as your name, contact details and Social Security number. However, you are usually also asked for information that is specific to your business. The additional information that a business credit card application typically requires includes:
- The name of your business
- Its entity type (C-corp, S-corp, LLC, nonprofit or sole proprietorship)
- Its Employer Identification Number (EIN), if available, or your Taxpayer Identification Number (TIN)
- Its contact details (physical address, phone number and email address)
- Age of business
- Number of employees
- Annual revenue and monthly spend
- Why is there a personal guarantee with business credit cards?
Most business credit cards require that applicants provide personal guarantees. Credit card issuers do this with the aim of recouping outstanding debt on business cards through cardholders’ personal finances. The personal guarantee for a business credit card is essentially a promise to repay any outstanding amount that your business cannot.
Credit card providers follow this route because they find it hard to determine the creditworthiness of small or new businesses. By asking you for a personal guarantee, a credit card issuer is essentially mitigating its risk in the event that there’s a default. It is for this reason that credit card providers look at your personal credit history before approving your application for a business credit card.
Unlike secured credit cards for businesses that require you to pay an up-front deposit, regular business credit cards come with no such requirement.
- Are the credit limits and rates the same as personal credit cards?
Business credit card applications usually ask for your personal and business income. As a result, you may expect a business credit card to come with a higher credit limit than a personal card. Besides, credit card issuers also take into account that businesses tend to spend more than personal consumers.
If you look at the business vs. personal credit card comparison from the APR point of view, you’ll notice that the former tends to come with higher APRs than the latter. In addition, since business credit cards don’t come under the purview of the Credit Card Act of 2009, card issuers have the liberty to change APRs at any time.
- Do business credit cards report to the same bureaus or have the same credit scores?
Business credit cards report to two of the same credit bureaus as personal credit cards — Experian and Equifax. They also report to Dun & Bradstreet (D&B), the only big name that focuses solely on business credit reporting.
Some card providers report business credit card activity only to your business credit files, and some report them to your personal credit files too. However, while business credit cards give you the means to build business credit, personal cards do not.
When you apply for a business credit card, it results in a new credit inquiry on your personal credit file. Going forward, how you use your business credit card may affect your business and personal credit histories.
When a business credit card’s activity makes it to your personal credit report, it is viewed as regular credit card debt under the VantageScore and FICO models. This implies that your business credit card will affect your payment history, credit utilization ratio and overall creditworthiness.
- Are the consumer protections the same as personal credit cards?
The Credit Card Act of 2009 applies only to personal credit cards and not their business counterparts. This means your card provider has the freedom to increase your card’s APR without providing advance notice. You might also have to pay significant fees for seemingly minor infractions such as late and returned payments.
Most prominent business credit card providers extend the same consumer protections that apply on personal credit cards to business credit cards. To find out if these apply to the business credit card you wish to get, go through the credit card agreement that you may find on the provider's website. Alternatively, you may contact the provider to ask.
- Are the reward categories and spending limits similar to personal credit cards?
Most rewards cards for businesses offer higher reward earning capabilities across business-specific categories. Examples include:
- Ink Business Cash Credit Card. This card offers 5% cash back on the first $25,000 spent at office supply stores and toward internet, cable and phone services each year. Purchases at gas stations and restaurants (up to a combined total of $25,000 per year) come with 2% cash back. All other purchases earn 1% cash back.
- Ink Business Preferred Credit Card. Use this card to get 3x reward points on the first $150,000 you spend on internet, cable and phone services; advertising purchases made online; travel and shipping. All other purchases come with 1x points.
- Marriott Bonvoy Business® American Express® Card. This card offers 6 points per $1 spent at participating Marriott Bonvoy hotels. You earn 4 points per $1 when you spend at U.S. gas stations, on U.S. wireless telephone services purchased directly from service providers, on U.S. shipping purchases and at U.S. restaurants. All other purchases come with 2 points per $1.
- Costco Anywhere Visa Business Credit Card by Citi. This card offers 4% cash back on the first $7,000 spent on eligible gas purchases, including gas at Costco per year. You get 3% cash back at restaurants and for eligible travel purchases worldwide. All other purchases come with 1% cash back.
- Business Platinum Card® from American Express. This card offers 5x points on flight and prepaid hotel bookings made through amextravel.com. Eligible purchases that exceed $5,000 get 1.5x points. All other purchases come with 1x points.
When it comes to spending limits, most business cards let you set individual spending limits for authorized users. This feature is not easy to find with personal credit cards.
- Do business credit cards have intro offers like personal credit cards?
Finding introductory APR offers that apply on balance transfers and purchases for 12 to 18 months is fairly easy when you’re looking for a personal credit card. However, only a handful of business credit cards offer intro APR offers on purchases, and even fewer offer them on balance transfers. These business cards have existing APR offers on balance transfers (and purchases):
- U.S. Bank Business Platinum Card. 0% APR on purchases and balance transfers for the first 18 billing cycles.
- Wells Fargo Business Platinum Credit Card. 0% APR on purchases and balance transfers for the first nine billing cycles.
When it comes to sign-up or welcome bonuses, you may find several business credit cards that fit the bill. Examples include:
- Capital One Spark Cash Credit Card. Earn a one-time $500 bonus by spending at least $4,500 in the first three months.
- Business Platinum Card® from American Express. This card lets you earn 100,000 Membership Rewards Points through its welcome offer, provided you spend at least $15,000 on eligible purchases within the first three months.
- CitiBusiness AAdvantage Platinum Select Mastercard. Earn 65,000 American Airlines AAdvantage miles by spending $4,000 on purchases in the first four months.
- Are there any other differences to note?
A number of business credit cards offer easy integration with various bookkeeping software to make tracking of expenses quicker and simpler. Some cards offer quarterly and annual category-based spending reports. Getting employee cards linked to your primary card is an option with several business cards, and you may also get to set specific spending limits. If your business credit card comes with a rewards program, there is a good chance that your employee cards earn rewards as well.
Take a look at our selection of the best business credit cards and choose one based on your specific requirements.
Do You Have to Use a Business Credit Card for Business?
Since most business credit cards come with business-specific features and rewards, using them for business-related expenses might work well for you. Using a business credit card makes sense if you want to build business credit. You may consider getting one if you want to keep track of business expenses easily. The potential to earn higher rewards through business-related spending categories such as office supplies and gas also works as a plus with business cards.
If your business does not have much of an income or expenditure, or if it has just one or two employees, you may keep using your personal credit card to pay for business expenses. Continuing using your personal card might work well, especially if you want to keep earning rewards through your everyday spending. If you plan to use a personal credit card for business, consider dedicating one specifically for this purpose, as business-related expenses will then be easy to track.
Why Not to Use a Business Credit Card for Personal Expenses
Using a business card for personal expenses is not in your best interest because of different reasons.
- It may violate your cardholder agreement. It is common for credit card issuers to get you to sign an agreement declaring that you will not use your business credit card to pay for personal expenses. If you do, your card provider holds the right to cancel your account.
- Filing taxes may become complicated. If you use your business card to pay for personal expenses, you might have trouble segregating the two when it’s time to file taxes. If you make a mistake and classify a personal expense as a business expense, an IRS audit may lead to back taxes and steep fines.
- It may affect your personal credit score. With most business credit cards, as long as you keep making payments on time, there should be no adverse effect on your personal credit score. However, if a business credit card reports to personal credit bureaus, the card’s limit and usage will impact your credit utilization ratio. In both scenarios, you may expect business credit cards to report to personal credit bureaus when your account becomes delinquent. Moreover, if you cannot pay off a balance, it will reflect on your personal credit score.
When Should You Switch to a Business Credit Card?
If you’re about to start a small business, the thought of getting a business credit card might have crossed your mind. While rewards and business-specific features might seem tempting enough for you to apply, you need to account for the higher APR you might need to pay if you plan to keep a revolving balance in your account. Ask yourself these questions to determine if you need a business credit card.
- Do you want to build your business credit history?
- Have you been responsible with personal finances and are confident that you will be with business finances as well?
- How often do you carry a balance on your personal credit card?
- Do you want access to a higher credit limit for business-related purposes?
- Do you have a personal credit card and need a separate one for your business to simplify tracking expenses?
- Do you want to keep personal and business expenses separate for taxation purposes?
- Do you want to benefit by earning higher rewards through spending on business-oriented categories such as office supplies and gas?
- Do you want access to credit for your business to get through short-term cash shortfalls?
- Do you want business-related perks such as free employee cards, complimentary insurance coverages and travel benefits?
If you are a small business owner, don’t hesitate to use a mix of personal and business credit cards for your purchases. By using both, you can earn heaps of rewards and benefits. — Brett Holzhauer
Other Questions You May Have About Business Credit Cards
Here are answers to other commonly asked questions about how business credit cards fare when compared to personal cards.
Takeaways & Next Steps
Now that you know the benefits and drawbacks of using personal credit cards for business, consider your specific requirements to decide if you need a business credit card. If you do, compare your options across parameters such as fees, APRs, rewards and additional perks before selecting one.
MoneyGeek’s Takeaways
Using a personal credit card for business transactions is alright if you have minimal business-related expenses.
Using a business credit card for business-related purchases gives you the means to build business credit.
Using a business credit card for personal expenses is typically not allowed and may hurt your personal credit score.
Compare & Review Credit Cards
MoneyGeek experts continually review and analyze spending trends of businesses across the U.S. based on data provided by the Bureau of Labor Statistics (BLS). They have evaluated close to 550 business credit cards so that our readers can easily look for options that align with their financial goals and spending habits.
Learn More About Business Credit Cards
The MoneyGeek editorial team remains up-to-date on the latest business and corporate cards trends to provide our readers with helpful information and recommendations. Whether you're looking for information about how to qualify for a business card or want to learn more about how reward cards work, you can count on us to guide you in the right direction.
About Rajiv Baniwal
sources
- Internal Revenue Service (IRS). "Publication 535 (2020), Business Expenses." Accessed August 24, 2021.
- Federal Trade Commission. "Credit Card Accountability Responsibility and Disclosure Act of 2009 (Credit CARD Act)." Accessed August 24, 2021.
Editorial Disclosure: Opinions, reviews, analyses and recommendations are the author’s alone and have not been reviewed, endorsed or approved by any bank, credit card issuer, hotel, airline, or other entity. Learn more about our editorial policies and expert editorial team.
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