Business credit cards vs. personal credit cards

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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 trying to determine which best fits your needs.

Factors like benefits and rewards, spending limits, consumer protection, employee perks, purchase reporting and so much more are important to consider when looking into business credit cards versus personal credit cards.

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

There are some key differences to take note of 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
  • Your credit score is tied to you and not your business
  • Specialized reward tracking for grocery stores and drug stores
  • Longer introductory 0% APR rates
  • 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 is 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

Do you have to own a business to apply for a business credit card?

You technically do not have to have a business up and running to apply for a business credit card. If you are someone who intends to start a business and has some business-related purchases under your belt, you’ll still have a solid shot at qualifying.

In general, any person who makes some kind of money independently could be considered a business. The process to apply might look familiar but will require you to answer questions regarding your business. For this reason, it’s best to only apply if you have a business or intend on starting one. The only other exceptions that justify a business credit card are corporate employees that have to regularly expense a lot of 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.

Business credit cards FAQ

Will a business credit card affect my personal credit?

There is a significant chance that at some point during your business credit journey, your personal credit score will come into play. Although you’re automatically assigned a business credit score when you apply for a business card for the first time, personal credit scores are still relevant in the initial application process for a business card.

A hard inquiry is often performed on your personal credit score as well as your business credit score. Credit card issuers have varying policies regarding reporting business activities on your business credit card to your personal credit report. For this reason, it is absolutely imperative that you do your research. Comb through the details and figure out which business card issuers’ policies will have an impact on your personal credit score.

Can I put personal expenses on a business credit card?

It’s best to separate business and personal expenses. Although it may be tempting to mix these two, it’s best to obtain a personal credit card for any personal expenses. Keeping personal and business expenses on their respective credit cards will make it easy to account for all your business expenses come tax time.

What are the easiest business credit cards to get approved for?

The easiest business credit cards to get approved for are secured business credit cards. These cards are tailored to consumers with little to no credit history or a poor credit score. Secured credit cards do offer fewer benefits and rewards compared to regular business credit cards, and they also require a cash deposit as collateral in order to be approved for the credit card. However, they are the best option to build up personal and business credit scores while obtaining the credit necessary to build financial health.

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. One of the main benefits of having a business card over a personal one is that business credit cards tend to have higher credit limits, which can allow for more flexibility when presented with steep operating costs small businesses sometimes come with. Other factors to consider are 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, whereas a personal credit card might not have those options.

When it comes to tracking finances and preparing for tax season, it may be beneficial for your small business to have a business credit card. Many business cards provide an itemized report of your spending, 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 one for any future business needs you may have.

However, a personal credit card might be best if you aren’t in need of a particularly high credit limit, and you value things like guaranteed consumer protection under the law. 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.

Best business credit cards for 2021

Ink Business Unlimited® Credit Card: Best for unlimited cash back

  • Earn a $750 cash bonus cash when you spend $7,500 on your card within three months of account opening
  • Earn an unlimited 1.5 percent cash back on everything you buy for your business
  • Introductory 0 percent APR on purchases for 12 months (13.24 percent to 19.24 percent variable APR after)
  • No annual fee

American Express Blue Business Cash™ Card: Best for startups

  • Earn 2 percent cash back on all eligible purchases on up to $50,000 per calendar year, then 1 percent; Also, 1 percent back on all eligible purchases after spending $50,000 per calendar year
  • Introductory 0 percent APR on purchases for 12 months (13.24 percent to 19.24 percent variable APR after)
  • No annual fee

Ink Business Preferred® Credit Card: Best for travel rewards options

  • Earn 3X points per $1 on the first $150,000 spent on travel and select business categories each account anniversary year; Also, earn 1X points on all other purchases with no limit to the amount you can earn
  • 100,000-point bonus points after you spend $15,000 on qualifying purchases in the first three months from account opening (worth $1,250 toward travel when redeemed through Chase Ultimate Rewards)
  • $95 annual fee
  • No foreign transaction fees
  • Free employee cards

The bottom line

If you are 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 absolutely important that you assess your needs to determine if a personal or business credit card is right for you.

Business cards are handy when it comes to 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 have an effect on your consumer credit score.

No matter which way you go, you should absolutely avoid mixing personal and business purchases. In the long run, especially when it comes to tax season, it will be beneficial to have those purchases made on separate credit card accounts.