What's the Difference Between Business and Personal Credit Cards?

By Frances Coppola | American Express^® Freelance Contributor
5 Min Read | Originally Published: November 13, 2020
Last Modified: November 10, 2022

Summary

Many small business owners never seriously consider the differences between a business versus personal credit card. They use their personal credit cards to meet their business needs, too. But depending on the nature and needs of your business, a business credit card may offer more benefits and flexibility than a personal credit card. And those differences can make another: a difference to your business’ bottom line.

Fundamentally, business credit cards and charge cards work much like personal credit cards. All three may or may not come with a credit limit, as some card issuers have eliminated pre-set spending limits to offer businesses expanded buying power. Of course, expanded doesn’t mean unlimited – spending power adjusts with a business’ use of the card, payment history, credit record, documented financial resources, and other factors. While a business charge card must be paid in full each month unless other arrangements are agreed to, business credit cards, like personal cards, typically allow a minimum payment per month, and you pay interest on any remaining balance. That way, you can optionally pay down personal or business credit card balances gradually.

Benefits of Business vs Personal Credit Cards

But that’s often where the similarities end. In important ways, business and personal cards are very different. Here’s a quick overview of business credit cards’ key benefits over personal cards, which this article will then go into in more detail:

• Generally higher spending limits than personal cards.
• They boost your business’ credit score, which could open access to bigger and broader forms of business finance.
• Rewards programs that emphasize business spending categories – and could help improve the business’ bottom line.
• Business-tuned tools that help you efficiently track expenses in different categories, or even by individual employees, and download information into your business accounting software.

Who Can Get a Business Credit Card?

Just about anyone who charges for a good or a service is eligible for a business credit card or charge card, including freelancers, tutors, and ride-sharing drivers. You don’t need to form a corporation to have a card-eligible business; sole proprietorships and partnerships are fine.  

The Nuts and Bolts of Business Credit Cards

When approving accounts and setting spending limits, business credit card and charge card issuers consider your business’ credit score, which takes account of factors such as revenue, cash flow, and supplier payment history, as well as your personal credit score. If you’re the owner of a new business that has yet to establish a credit record, the card could be issued on your personal credit score alone.[i]

Either way, spending limits are typically higher on business cards than on personal credit cards, even for businesses that have yet to build a credit score. This can be a boon for a fast-growing new business with high expenses.

Do business credit cards affect personal credit?

Does business credit affect personal credit? That depends. In some cases, your business card usage will impact both your business credit score and your personal credit score. As always, it’s a good idea to read the fine print when taking out a business credit card, to see whether it will impact your personal credit.

It’s important to know that business and personal credit scores usually are completely different. Instead of reporting payment history, balances, etc., to one of the “big three” consumer credit reporting agencies, business card issuers send information to credit bureaus like FICO’s Small Business Scoring Service (SBSS). For a new business, managing a business credit card well can help build your business’ credit score, potentially giving you access to other forms of credit such as short-term loans, or working capital financing. However, if your business fails to maintain timely payments, your own personal credit score could be adversely
affected, since some issuers also do report business credit information to personal credit bureaus. It may be worth checking which bureau(s) your business card issuer reports information.[ii]

Fees and interest charges depend on the card issuer, but tend to be higher than on personal credit cards. Business card users also don’t have the same protections afforded to consumers using personal credit cards, such as limited liability in the event of fraud. Some issuers add such protections on their own, though, so it’s wise to check a business card’s terms and conditions carefully.

Rewards Points and Cash Back Programs for Business Credit Cards

Like personal cards, business credit cards typically have rewards points or offer cash back. Such rewards programs on business credit cards tend to be more oriented towards business spending than similar personal credit card programs. For example, they may offer discounts on spending for office furniture and supplies, advertising, or business travel. They may offer cash back on purchases, or an introductory bonus subject to a spending threshold being reached within a given timeframe – usually three months. Another key difference of business vs personal credit cards: introductory bonuses are typically higher.

Some business credit cards offer manager and employee perks in their rewards programs. These are typically personal treats such as short breaks. You can reward high-performing employees with these perks, or use them as incentives for your team. Or you can use them yourself for some much-needed R&R.  

Some business credit cards use the same rewards program as the issuer’s personal credit cards. They may allow you to combine the rewards you earn on your business and personal cards. Choosing a business credit card that pools rewards with your personal credit card can enable you to build rewards points fast. If you
have employees, they too can build rewards points by using employee cards on your business credit card account – and some programs let business owners choose to have points from employee spending accrue to their own account.

Many businesses find that a carefully chosen rewards or cash back program can reduce business costs. However, if you don’t make many purchases, a business credit card may not be the best choice for you, since you might not use it enough for the rewards program, cash back, or introductory bonus to offset higher fees and interest.

Getting the Most Out of a Business Credit Card

Business credit cards come with many different rules, benefits, and options, so it’s worth shopping around to find the right card for your business. Think about how you plan to use the card: Will you make sufficient use of the rewards program to offset any fees? How might the other features help your business?

For example, if you or your employees travel a lot for the business, you can choose a business travel credit card with a travel-oriented rewards program such as discounts on air fares, hotel bills, and rental cars. You’ll have one statement to check, and business credit card issuers typically provide detailed bills, so the individual travel invoice is easy to spot.

If your firm has high gas expenses, you could consider a credit card that offers higher rewards and discounts at participating gas stations.  

You can also use a business credit card or charge card account to manage employee expenses. Many business card issuers offer multiple cards on the same account at no extra cost, and oftentimes you can set spending limits for individual employee cards. Your employees’ spending also can appear on a single itemized statement, enabling you to track expenses closely and keep control of costs.

Many business credit card issuers provide online tools to enable you to track expenses, link them to invoices and receipts, and download statements into your own accounting software. Using a business card to streamline and automate expense management can leave you more time to develop your business.