There are often misconceptions about the differences between personal and business credit cards. While the basic idea is simple — personal cards are for individual use and business cards are for business-related expenses — the reality is more nuanced.

Business cards are available not only to registered companies but also to sole proprietors, freelancers, and contractors. This means that individuals running a small business or side hustle may benefit from using a business card. There are several reasons why they might want to.

Key differences between business and personal credit cards

Application impact on personal credit. Applying for a business card results in a hard inquiry on your personal credit report, which may have a short-term effect. However, ongoing use typically does not impact your personal credit score, as long as payments are made on time.

Potential to build credit history. In some cases, responsible use of a business card can even help improve your personal credit score.

Eligibility for sign-up bonuses. You are usually eligible for the sign-up bonus even if you already have a personal card from the same provider.

Different value rewards. Sign-up bonuses with a business card are often higher, but with increased spending requirements. Ongoing rewards and benefits are more tailored to business use.

Financial organization. Having separate business and personal cards is not a requirement. But it can be useful to separate finances for accounting and tax purposes, and financial clarity.

Who can apply for business or personal credit cards?

Business cards are also available to sole proprietors

The target audience for credit cards is clear from the naming. Personal cards are intended for individuals and business cards are intended for companies.

However, eligibility is more flexible than many realize.

Personal credit cards are available to anyone. Exactly which cards are available, and what terms and APRs are offered will depend on an individual’s credit history.

A personal card can be used for any spending. This includes using it for your own business spend – but there are reasons why anyone with significant business spending may want to consider a business credit card.

Business credit cards are intended for use by businesses, for their different spending patterns and often higher expenses. A US-registered business can apply for such a card using the employer identification number, or EIN, (issued by the IRS), but personal details are also required. You are still personally liable for spending on a business credit card.

Business cards however are not just available to registered business with an EIN. Individuals operating any sort of business can also apply – using their personal details and Social Security Number. This includes sole proprietors, freelancers, and contractors.

Note that corporate credit cards are different from personal and business credit cards. These are available to larger, established businesses, based on business financials and credit history. With a corporate card, there is usually no need for a personal guarantee.

Credit checks and reporting

Business cards may also report some information to consumer credit bureaus

Personal credit cards generally report activity to the three main consumer credit bureaus (Experian, Equifax, and TransUnion). Ongoing card usage (including credit limits and usage, and payment history) will be reported.

Business credit cards report activity to business credit bureaus (the three main ones are Dun & Bradstreet, Experian Business and Equifax Business). The credit history built up here can help with future business loans or other financing applications.

But with business cards, some information may also be reported to the consumer credit bureaus. The interaction between business card providers and consumer credit bureaus is more complicated.

Some factors and considerations here:

·  With all business cards, your personal credit score is an important part of the application and will affect the cards available, plus APRs and credit limits offered. But if the card is used well and payments are made on time, it will likely not have an ongoing effect on personal credit score.

·  An application for a business card will count as a hard inquiry on your personal credit.

·  Ongoing activity and credit usage is not generally reported and will not affect personal credit score. This is a key consideration if you have a high spending business, or one that uses credit differently throughout the year (with cyclical stock purchasing for example).

·  If you miss payments or default, many issuers will report this. You are also personally liable for the debt.

·  There are differences in reporting between card providers. Capital One is widely regarded as reporting both positive and negative data. Most others providers only report negative information (this is according to data from NerdWallet).

·  This more extensive reporting from Capital One is not necessarily a bad thing – it can help you improve your personal credit score too.

Credit limits

Business cards often have higher credit limits

Credit limits for all cards are determined based on credit scores and application information. Both personal and business cards will take into account personal income, but business cards will also consider business revenue. This often results in business cardholders being offered a higher credit limit.

A higher credit limit can be useful for many businesses. It allows more flexibility in cyclical business spending and in stock purchase, for example.

Many business cards allow for multiple cardholders (typically business employees), each with a customizable spending limit. Personal credit cards are not intended to be used in this way.

Sign-up bonuses of cashback, points, or miles

Business cards often have higher bonuses – available even if you already have a personal card

Generous welcome bonuses of cashback, points, or miles are common with many personal and business cards. These can be especially valuable when used for flight awards with airline loyalty programs.

Bonus amounts vary between cards, but business cards often have higher bonuses. These are likely to come with higher spending requirements to trigger the bonus, but this can suit business spending.

As just one example:

·  The Business Platinum Card® from American Express has one of the highest bonuses currently available – offering 150,000 Membership Rewards® points after spending $20,000 in the first 3 months.

·  In contrast, the Platinum Card® from American Express (for individuals) has a lower sign-up bonus of 80,000 points with a reduced spending requirement of $8,000 in 6 months.

Importantly, you can receive both the bonuses for personal and business cards. Many providers limit sign-up bonuses to once per lifetime for a card. If you have already received the bonus for a personal card however, you can still receive it for the business version of the card.

Benefits offered by personal and business cards

Benefits and bonuses differ between all cards – but with business cards are more targeted at business use.

Credit cards are, of course, useful tools for spending and borrowing. On top of this, they often offer additional benefits – such as cashback, points or miles as rewards for card spending, travel perks, and retailer offers or credits.

These benefits largely depend on the annual fee paid. Cards with higher annual fees generally offer improved rewards and benefits. This is discussed in more detail in another guide.

Personal and business cards offer some very different benefits. Businesses and individuals have different needs and spending patterns, and the cards and their benefits are designed to reflect this. This is a good reason why individuals operating a business might want to look too at business cards.

Personal credit card benefits often include:

·  Common bonus categories for rewards earning include groceries, dining, gas, or entertainment.

·  Longer interest free 0% APR offers on purchases and balance transfers.

·  Travel booking and shopping rebates.

Business credit cards benefits often include:

·  Common bonus categories for rewards earning include office supplies, communications, advertising, and travel.

·  Statement credits or rebates with typical business retailers. The American Express Business Platinum card, for example, offers statement credits including with Dell, Adobe, and Reed.

·  Specific features for business use – such as multiple cards offered to employees, tools for expense tracking, and accounting software integration. 

Availability of 0% APR offers

Business cards are more restrictive with 0% APR offers

An introductory 0% interest rate on purchases and/or balance transfers is a popular benefit with many cards. This is useful to cover larger or unexpected purchases.

Many personal cards, including those with no annual fee, have generous offers here. For example, the personal Citi® Double Cash® Card offers an 0% on balance transfers for 18 months.

Business cards do not tend to offer as much. While some cards do have an introductory 0% APR offer, this is usually for a shorter time and may not apply to balance transfers.

Differences in legal consumer protection

Business cards are not covered by the same federal laws as personal cards.   

Personal cards are protected by powerful consumer protection laws. In particular, the Credit Card Accountability Responsibility and Disclosure Act of 2009 and the Fair Credit Billing Act (FCBA) offer well-developed protection in several areas. They define caps on late fees, limits and notice periods for interest rate changes, and grace periods to pay balances.

In contrast, business credit cards are not covered by these same laws. Card issuers may offer similar protection voluntarily, but they are not obligated to do so. Without this protection, it is possible that APR rates could change at any time, and charges could be higher.

You should check the specific terms and conditions of any business card instead of assuming it is the same as a personal card.

Summary -  Should You Get a Business Credit Card?

There are clear pros and cons to using a business credit card. If you're operating any kind of business — including freelancing or sole proprietorship — a business card may be worth considering.

A business credit card can offer:

·  Higher credit limits.

·  Business-specific rewards that suit high business expenses.

·  More generous sign-up bonuses.

·  Separate credit reporting, which protects your personal score when the card is managed well.

·  Separation of finances. Helps keep personal and business spending apart, and aids with accounting and tax purposes.

But be aware with business cards:

·  You’re still personally liable for debt.

·  Missed payments can affect personal credit scores.

·  Lucrative bonus offers may have higher spending limits.

·  There are fewer 0% APR offers.

·  Weaker legal protections compared to personal cards.

‍