Key takeaways

  • When choosing between a business credit card and a personal credit card, consider your method of income as well as your financial needs and spending habits.
  • Business credit cards can simplify bookkeeping and offer higher spending limits, specialized rewards and employee card options.
  • Personal credit cards offer longer 0 percent introductory APR periods and consumer protections.

Are you in search of a credit card for your small business? Having trouble deciding between a business credit card and a personal rewards credit card? Both business and personal credit cards have similar basic functionalities, but the differences are important to pay attention to when determining which best fits your needs.

Factors like benefits and rewards, spending limits, consumer protection, employee perks and purchase reporting are important to consider when comparing business credit cards and personal credit cards. Here are some key differences to keep in mind when applying for personal and business credit cards.

What’s the difference between a personal and a business credit card?

There are a few notable differences when dealing with business and personal credit cards. On the surface, they may seem pretty similar. Business and personal credit cards both have rewards and build interest on leftover balances. However, the significant differences lie in the details:

Personal credit cards Business credit cards
Pros
  • Credit score tied to you and not your business
  • Specialized reward tracking for grocery stores and drug stores
  • Often longer 0% intro APR offers
  • Consumer protection is guaranteed under the law
  • Typically a higher spending limit
  • Specialized rewards for business-related categories like phone bills, office costs and online advertising
  • End-of-year itemized report on spending often provided
  • Employee cards with customizable spending limits
  • Typically bigger welcome bonuses
Cons
  • Lower spending limit
  • Lack of detail with end-of-year reports
  • No employee card options
  • Some issuers report to personal and business credit score companies
  • Consumer protection isn’t guaranteed

Are business credit cards only for business owners?

Technically you do not have to have a business up and running to apply for a business credit card. If you intend to start a business and have some business-related purchases to make, you’ll still have a solid shot at qualifying.

Generally, any person who makes money independently could be considered a business. You don’t have to have a registered LLC or corporation to apply for a business credit card. When filling out an application for a business credit card, you can list yourself as the sole proprietor with your Social Security number, rather than listing an EIN.

The application process might look familiar but will require you to answer questions regarding your business. For this reason, it’s best only to apply if you have a business or intend on starting one. One exception might be corporate employees that regularly expense purchases for work.

However, it’s important to be intentional about the credit cards you choose to apply for. If you don’t have any of these needs and only really need a card for personal expenses, then you should consider applying for a personal credit card instead.

How to decide between a business or personal credit card for your small business

Deciding between a business and personal credit card may seem daunting, but it’s not as difficult as you may think. First, it’s imperative to determine what is important for your small business.

Credit limits

Business credit cards tend to have higher credit limits than personal credit cards. This can allow for more flexibility when presented with steep operating costs small businesses sometimes come with. However, a personal credit card might be best if you don’t need a particularly high credit limit and you value things like guaranteed consumer protection under the law.

Category spending

Consider the types of frequent purchases you’ll be making on behalf of the business. If you have recurring purchases like office supplies, phone bills or marketing costs, some business credit cards tailor cash back rewards to those specific categories.

A personal credit card might not have those options. If your business doesn’t tend to lean in one particular direction regarding spending, a flat-rate rewards card may be the way to go. However, flat-rate rewards are available with both personal and business credit cards, so this category depends entirely on personal preference.

0% intro APR periods

In line with the previous point, personal credit cards sometimes offer 0 percent intro APR periods that last anywhere from 12 to 21 months for purchases and balance transfers. On the other hand, business credit cards generally offer relatively short 0 percent APR periods, and they typically only apply to purchases, not balance transfers. If you aren’t looking to transfer a high-interest debt from one card to another, you probably won’t be concerned about a business credit card offering a long 0 percent intro APR period on balance transfers. But regardless, it is something to keep in mind.

Record keeping

It may be beneficial for your small business to have a business credit card for tracking finances and preparing for tax season. Many business cards provide an itemized spending report, making it simple to keep track of possible deductions. However, personal credit card reports aren’t as detailed. If you do not have a business credit score, then you might want to start building a business credit score for any future business needs you may have.

Consumer protections

Although many business credit card issuers offer consumer protections, they are not required to. If your recurring purchases fall in line with rewards offered by some personal credit cards, then that’s also worth considering.

The bottom line

If you’re not making money independently and have no intentions of doing so (and you aren’t expensing purchases on behalf of a company), then a business credit card is most likely not for you. However, if you do fall into one of these categories, then it’s important to assess your needs to determine if a personal or business credit card is right for you.

Business cards are handy for bookkeeping and dealing with higher operating costs, whereas a personal credit card might have a longer introductory 0 percent APR and guaranteed consumer protections under the law. While a business card has the potential to impact your personal and business credit score, a personal credit card will only affect your consumer credit score.

No matter which way you go, you should avoid mixing personal and business purchases. In the long run, especially during tax season, having those purchases on separate credit card accounts will be beneficial.