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Main differences between business cards and personal cards

Business credit cards usually come with higher spending limits and rewards but fewer protections

Summary

Whether you are a small-business owner or simply have a side gig, business credit cards can offer you more spending power and rewards that align with your expenses — but they might also come with potential drawbacks. Here’s what you should consider before applying for a business card

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Business credit cards and personal credit cards can both make charging purchases and earning rewards convenient.

On the surface, they might seem the same, but there are actually several things that separate business cards from personal cards. If you’re interested in getting a business credit card, these tips can help you understand the differences between the two.

See related: Pros, cons of getting a business card for personal use

Business credit cards are designed for business use

A business credit card is meant to be a tool for making purchases for your business. Personal credit cards, on the other hand, can be used by anyone.

Opening a business credit card assumes that you have some sort of business or that you’re planning to start one. The good news is that credit card companies can offer some flexibility in what constitutes a business.

For example, you don’t necessarily need to have a federal employer identification number (EIN) or be incorporated to be approved for a business card. It’s possible to get a business credit card even if you only have a side hustle or work as an independent contractor.

One thing you might be wondering is whether you can use a business credit card for personal spending. You can, says Brian DeChesare, founder of finance blog Mergers & Inquisitions, but you shouldn’t.

“When preparing your taxes, you’ll have to analyze a year’s worth of transactions one by one,” says DeChesare.

Not only is that time-consuming, but it can make reporting deductible expenses tricky. And claiming personal expenses as a business deduction could accidentally land you in hot water with the IRS.

If you’re considering merging business and personal expenses on the same card, make sure you have a good accounting system in place, says Spencer Reese, owner and chief editor at Military Money Manual.

Business credit cards can also be helpful in establishing and building business credit. While you may apply for a business card using your Social Security number, your account history can be reported to the business credit bureaus. That can be instrumental in developing a good business credit score.

Rewards and bonuses align with how you spend

Business and personal credit cards can offer rewards and introductory welcome bonuses, though they aren’t always alike.

  • With the Chase Ink Business Cash Credit Card, for instance, businesses earn 5% cash back on the first $25,000 in combined purchases at office supply stores and on internet, cable and phone services each year.
  • The Chase Freedom card, which is a personal card, offers 5% cash back on up to the first $1,500 each quarter in varying bonus categories following activation, which in the past have included department stores, grocery stores and gas.

That’s another reason why it makes sense to keep business and personal spending separate. By tailoring your spending to your card and its associated rewards categories, you have the best shot at maximizing your rewards earnings.

In terms of welcome bonuses, they can sometimes be more generous for business cards, says Reese. But consider what you have to spend to qualify.

For instance, the Capital One® Spark® Miles for Business and the Capital One® Venture® Rewards Credit Card both feature a 50,000-mile introductory bonus if you meet a certain spending threshold within the first three months. But to qualify for the bonus with the Spark Miles card, you need to spend $4,500 versus the $3,000 required by the Venture Rewards card.

Interest rates and fees aren’t identical

Both personal and business credit cards can charge interest and fees. The difference is that some business credit cards carry higher annual costs.

Jeff Rose, a certified financial planner and founder of Good Financial Cents, says many business credit cards waive the annual fee the first year, but it shouldn’t be overlooked when choosing a card.

“You will eventually have to pay it, which is something to think about if you don’t make a lot of purchases,” he says.

The card’s APR is another consideration. If you think you’ll carry a balance at any point, the interest charges could increase your business debt.

“Paying interest on purchases makes your rewards card not very rewarding,” says Rose.

A business charge card is an alternative to consider if you’d prefer to avoid interest charges. Since these cards require you to pay in full each month, you won’t pay interest on what you charge. The trick is making sure you’re only charging what you can afford to pay off at the end of the month.

See related: When is a credit card annual fee worth it?

Business and personal cards offer different perks

Similar to rewards and welcome bonuses, business credit cards can diverge when it comes to perks and benefits. Again, the emphasis is on providing benefits and features that are valuable to businesses, versus everyday spenders.

With personal cards you’re often getting benefits such as purchase protection, travel insurance and zero liability fraud protection, says Reese. Business credit cards tend to emphasize other benefits, such as expense management controls or discount programs that can save your business money.

Personal and business credit cards have one thing in common with regard to perks: the higher the card’s annual fee, the better they tend to be.

Take The Platinum Card® from American Express and The Business Platinum Card® from American Express, which have annual fees of $550 and $595 respectively.

  • Both cards offer a $200 annual airline fee credit, airport lounge access and fee credit toward TSA Precheck or Global Entry.
  • The Business Platinum card also includes concierge service, Global Dining Collection access and a 35% points bonus when redeeming points for flights through the Membership Rewards program.

Business cards may offer more spending power

When opening a new business or personal credit card, your first question may be how much credit you’re approved for.

DeChesare says that with business credit cards, the limits are typically much higher than personal cards, and for good reason. “That provides the business with access to emergency financing.”

Having higher limits on a business credit card makes sense, since businesses may charge more on average each month than the everyday person. Individual credit limits for business or personal cards typically depend on your credit score and financial profile.

If you have a brand-new business, for example, then it’s likely you may have a lower credit limit to start. But overall, you may have more room to spend with a business credit card than you would a personal card.

There are some personal and business charge cards that have no preset spending limit. This means that instead of having a fixed credit limit, the amount you can charge each month can fluctuate based on account activity and credit history.

That’s convenient, but again, how you use your spending power with a credit card matters.

“The cons of a personal credit card are similar to that of a business card,” says Rose. “If you don’t make a habit of paying off your balance each month it can easily get out of hand.”

Card protections aren’t the same

One last thing to know about business versus personal credit cards is how you are (and aren’t) protected when you spend.

“Business credit cards have higher limits, but they also have higher fees and fewer protections,” says DeChesare. “For example, the issuer of a business card can increase your APR out of the blue. That isn’t permitted with a personal credit card.”

While some business credit card issuers have opted to extend consumer benefits outlined in the 2009 CARD Act to business cards, not all of them have. For that reason, it’s important to carefully research a business credit card’s protections, features and benefits before applying.

The information about Chase Ink Business Cash, Chase Freedom and Capital One Spark Miles for Business has been collected independently by CreditCards.com. The card details have not been reviewed or approved by the card issuers. 

Editorial Disclaimer

The editorial content on this page is based solely on the objective assessment of our writers and is not driven by advertising dollars. It has not been provided or commissioned by the credit card issuers. However, we may receive compensation when you click on links to products from our partners.

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Credit Card Rate Report Updated: August 5th, 2020
Business
13.91%
Airline
15.48%
Cash Back
16.09%
Reward
15.82%
Student
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