Business Credit Cards vs. Personal Credit Cards

How To Choose the One That’s Right for You

Woman in an office pays with a credit card while seated at a computer

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As an individual, you probably know that using a personal credit card responsibly can help you build your credit. And if you’re a small-business owner or entrepreneur, choosing between a personal and business credit card to cover your business expenses may help protect your finances.

Functionally, there’s not much difference between business and personal credit cards. With both, you’re allowed to use a certain amount of credit on a revolving basis, and are required to repay whatever you’ve borrowed—sometimes all in full and sometimes with minimum monthly payments.

However, digging deeper, you may discover a few nuances that make an impact on your choice. Here’s what to know about business vs. personal credit cards, and how to choose the one that’s right for you.

Business vs. Personal Credit Card Terms and Conditions

Digging into the fine print of any credit card is important to make sure you’re abiding by the terms and conditions. Business credit card terms may expressly require the card to be used only for business expenses.

And even if a credit card issuer doesn’t specify what the card can be used for, it may be better for your finances to keep your business spending separate. Mixing business and personal transactions may make accounting and expense tracking difficult or time consuming.

The Credit CARD Act

The Credit CARD Act protects consumers from abusive credit card practices on their personal credit cards. However, it doesn’t apply to business credit cards.

As a result, your business credit card issuer can raise your rate without warning, or decline to lower the penalty rate, even if you’ve made six consecutive monthly payments after a late payment.

For example, triggering the penalty APR with two or more late payments in 12 billing periods on a Capital One Spark Cash for Business credit card means the penalty APR will be applied to revolving balances until you’ve made 12 consecutive on-time payments.

Some credit card issuers may voluntarily provide some protections to business credit card holders. Read your cardholder agreement to understand every detail of your credit card.

Building Your Business Credit

As an individual, a personal credit card can help you build your personal credit. Using a card responsibly can help you increase your credit score and establish a positive credit report.

As a business owner, the same thing is true of a business credit card. If you’re planning to apply for a business loan, lease, or equipment financing, or you’d like to increase your credit lines and secure more favorable credit terms, you’ll need to build and establish business credit first.

Opening a business credit card under your LLC or corporation’s legal business name, and using your employer identification number can help you establish a solid payment history for your business, as long as the issuer reports to the business credit agencies.

You can also establish business credit via other forms of borrowing, including vendor credit, supplier credit, retail credit, and service credit. Make sure the creditor reports to at least one of the three major business credit bureaus: Dun & Bradstreet, Experian, or Equifax. You’ll have to apply for a free DUNS number to create a business credit profile with Dun & Bradstreet.

A business credit card that reports only to business credit agencies (not consumer credit agencies) protects your personal credit history and score.

Better Rewards for Business Owners

If you have a personal rewards credit card, you may be able to earn miles, points, cash back, and more. The same goes for a business credit card.

If your business spends heavily on supplies, card rewards may become more appealing. Many business credit cards offer rewards such as cash back or airline miles for business spending, or generous bonuses.

Other perks may include employee cards, the potential ability to spend over your credit limit, access to automatic rebates for business spending, credit for Global Entry or TSA Precheck, expense management, car rental insurance, and more.

Compare business card fees before signing up. Some business cards with the best rewards may also charge high fees.

Access More Business Credit

Higher business overhead may demand access to a higher credit limit—something that may not be available with a personal credit card.

For example, if you’re approved for some Chase business credit cards, the minimum credit limit offered is $3,000, which increases up to $25,000 provided you supply additional information. Wells Fargo grants a credit limit between $2,500 and $50,000 for its business credit card.

Paying for large business expenses with a personal credit card could damage your personal credit history if your spending raises your utilization. Keep in mind that it’s best to have a low credit utilization ratio.

Personal Liability for Business Purchases

Naturally, you’re responsible for your personal credit card spending, even if the purchases were made for your business. You may also be personally responsible for purchases made on your business credit card by you and any employees you’ve authorized to use the account, if that clause is included in the credit card terms. Personal liability comes into play if, for some reason, your business can’t repay the purchases made on the credit card.

Because you’re personally responsible for the business credit card spending, it’s important to spend within your business’s budget.

What To Consider Before Getting a Business Credit Card

In many cases, using a business credit card is best for your business as it allows you to take advantage of business benefits while keeping your personal finances separate.

More specifically, you may want to get a business credit card when:

  • You need to streamline expense tracking
  • You want to allow employees to make business purchases
  • You have a lot of business-specific expenses that can earn rewards
  • You need a higher credit limit to accommodate your business spending

If you have a small business or are an entrepreneur with very low overhead, a business credit card may not be necessary. You may be able to use your personal credit card if:

  • You don’t need to build business credit for larger financing in the future
  • You don’t have many business expenses
  • You’re a sole proprietor and don’t file a separate tax return for your business
  • You don’t want to pay the fees associated with a business credit card

The Bottom Line

Deciding to use a business or personal credit card is an important decision to make if you’re an entrepreneur or small-business owner. Your personal credit card may offer you more protection, while your business credit card can help you establish a business credit report. Both come with pros and cons, so it’s important to consider all of your options before signing up.