Personal Credit Card vs. Small Business Credit Card for Your Business

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Updated on Tuesday, July 21, 2015

Black woman using credit card and laptop

Need a credit card to use for your business, and aren’t sure whether to choose a personal or business credit card? There are quite a few differences you need to be aware of to make an educated decision.

Why? For one, personal credit cards offer certain protections under the Credit CARD Act of 2009 that business cards don’t.

Second, while business credit cards can be used for business expenses, your personal credit is still taken into consideration when applying for one. With most cards, you’re still personally liable for any debt accrued on your business card.

Third, you should know you don’t actually need to be a business owner in the traditional sense to get a business credit card. Freelancers and contractors can apply, too. Most of the time, you only need to supply a Doing Business As (DBA) name. You can use your social security number and name and classify yourself as a sole proprietor when applying.

If you want to know all the pros and cons of using a personal or small business credit card for your business, read on to learn what factors to consider.

Using a Business Credit Card – The Cons

Applying for a business credit card to use for your business might make sense intuitively, but it’s critical you read the fine print before proceeding with one.

We mentioned business cards aren’t treated the same as personal cards due to the Credit CARD Act of 2009. What exactly does that mean?

With personal credit cards, you get a 21-day window for payments. With business credit cards, that doesn’t exist. Your due date can change month to month.

With personal credit cards, you get 45 days notice if your interest rate is increasing. With business credit cards, your rates could go up overnight.

This applies to introductory rates, too. Introductory rates for personal cards need to be offered for at least six months. There’s no mandatory period for business cards – the introductory rate can disappear at any time.

Additionally, payments might be applied differently to business credit cards. While payments are directed to the highest APR balance for personal credit cards, payments made toward balances on business credit cards can be applied toward the balance with the lowest APR. This varies by issuer.

There are also no limits when it comes to fees for business credit cards. For example, late fees can’t exceed $25 on personal credit cards. That’s not true for business credit cards.

Lastly, some companies don’t report your business credit history on your personal credit history. The two tend to be separate, unless you make a mistake with your business card. For example, if you’re late on a payment or default on your business credit card, it will show up on your personal history.

This also means business credit cards aren’t the best choice if you’re looking to improve your credit score, as good history isn’t likely to be reported. However, it can at least help you build your business credit score.

Overall, it’s important to review the details before you apply. Some companies voluntarily give their business credit cards the same protections offered to personal credit cards. Many will give you notice before raising your rates, or changing your due date.

Using a Business Credit Card – The Pros

Now that you know what to look out for when applying for a business credit card, we can talk about the perks.

The most obvious benefit is being able to separate personal and business transactions with ease. As a business owner, you know how hectic tax time can be. If you’re sick of shuffling through statements trying to figure out which transactions were personal or business related, you won’t have to anymore.

Business credit cards often come with tools to organize and categorize your business spending, too. If you want to get multiple cards for employees, this will make streamlining your spending simpler.

You’ll also have a much higher credit limit on a business credit card than you will with a personal credit card. Sometimes larger expenses are needed to get your business off the ground, or you’re going through a period of growth where you want to invest in expanding.

Some business credit cards also come with special repayment terms. If you need help managing your cash flow, you may be able to work out a different payment system with your creditor.

Although business credit cards may not come with the consumer protections we’re used to with personal credit cards, they still offer similar benefits when it comes to specific Visa or MasterCard benefits. Warranties, fraud protection, and price protection are a few everyone has access to.

If you love getting rewards points with credit cards, business credit cards often have the best sign up bonuses. They also have higher spending requirements, but if you time your sign up with a large business expense, it shouldn’t be hard to meet it. Just remember to watch out for annual fees, as these tend to be higher on business rewards cards.

Additionally, you can earn bonus points on business expense categories such as office supplies, travel, and wireless phone plans. This means you can capitalize on getting more points for business expenses, while still using your personal cards for things like gas and groceries. You’re able to get the best of both worlds when it comes to gaining rewards points.

[Look for a Business Credit Card Here.]

Using a Personal Credit Card for Your Business

If using a business credit card sounds a bit too volatile for your tastes, stick with a personal credit card. Owning a business doesn’t mean you need to have a business credit card if it’s something you’re not comfortable managing.

It might be more challenging to separate business expenses from personal expenses, but if you open a personal card solely dedicated to business transactions, you won’t have as much difficulty come tax time.

Plus, if your business is on the small side, or you work alone, then you might not spend enough to make business rewards cards worthwhile.

There’s nothing wrong with either approach, but it can be more beneficial to use a business credit card.

The Bottom Line

Opening a business credit card means your eyes need to be on your account as often as possible. Set reminders to check your due dates, and try not to carry a balance on your card. This will automatically protect you from any rate hikes that may occur, and you won’t have to worry about introductory rates expiring randomly.

As long as you treat your business credit card like you would a personal credit card (that is, responsibly), you’ll be able to take advantage of the many perks offered to business owners. You’ll have an easier time sorting your expenses, your business and personal credit will (for the most part) be kept separate, and you can enjoy gaining rewards points from both your business and personal cards.

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