Differences between business and personal credit cards

Take charge

Running a business is so much more than having a big idea and putting in the hours to make it happen. Whatever the skill or talent that defines the heart of your business, you’ve likely had to learn a lot on the fly about other fields, including marketing, accounting, purchasing, human resources and more to successfully keep your business afloat.

For many business owners, understanding the differences between business and personal credit cards can be key. Can you use your personal credit card for business purposes? Does your business credit card offer you the same protections as a consumer credit card? Why can’t you just use the same credit card for everything?

Let’s break down the key differences between business and personal credit cards to identify the best choice for your business needs.

Personal credit cards don’t build business credit

If you ever apply for a business loan to fund your venture, you’ll need to establish a strong credit history for your business. In addition to paying invoices and other debt payments on time, one of the best ways to build business credit is through responsible credit card use.

If you choose to use a regular consumer credit card for business purposes, that history won’t be reflected on your business’s credit report. That means when you go to apply for a bank loan, lenders won’t have the full picture of your credit worthiness and, as a result, may offer less favorable rates.

Both will hold you financially liable

Some entrepreneurs falsely believe that as long as they’re using a business credit card, they won’t be held personally responsible for the debt. In reality, you as the cardholder and business owner are responsible for any credit card debt incurred regardless of whether your card is technically registered for business or personal use.

That’s why no matter the type of card or the purpose of your credit card use, it’s critical that business owners use credit cards responsibly. Make responsible purchasing decisions, pay your bill on time every time, and do not take on more debt than you can afford.

Business credit cards don’t offer the same protections

When Congress passed the Credit CARD Act of 2009, consumer credit card holders were guaranteed a new and better level of protection from confusing or predatory lending policies. Unfortunately, though, new regulations from Congress don’t extend to business credit card holders — so if you’re using your credit card for business purposes, you could still be subject to these predatory practices.

Thankfully, many of the top U.S. credit card companies, recognizing the need for protections for business card holders, have voluntarily put in place the same restrictions and regulations on their business credit cards that now are required for consumer cards.

Get benefits and rewards that meet your business needs

These days, most credit card companies offer special benefits, perks and rewards for both personal and business credit card users. But as a business owner, choosing a business credit card can offer benefits better tailored to your specific needs.

Many business credit cards offer loyalty programs specifically tied to common business purchases like gas, office supplies or printing services. By using your business credit card responsibly, you earn business-specific rewards or even cash back on purchases you would be making anyway.

Other perks can include online account dashboards, custom spending controls and monitoring for employee cards, and other useful small business-specific features. And because credit card companies understand the revenue ebbs and flows of seasonal businesses, some offer discounts for paying a balance early during strong sales months, or even an extended grace period during slower seasons.

Keeping business and personal finances separate

More important than the exact type of card you use for everyday business purposes is the principle of keeping your business and personal finances separate. Having a separate credit card for business use will allow you to track business expenses independently of your personal ones; this is essential for accurate financial and tax reporting.

If you’ve been using a single credit card to maintain your personal and business finances, take steps to fix the situation as soon as possible. Maintaining your business’s financial health and integrity is worth the education and research required to appropriately manage your day-to-day business finances.

Ultimately, the choice is yours whether to use a dedicated personal consumer credit card or a business-specific credit card for your everyday business purchases. If you’re a sole proprietor with a very small business and don’t need the benefits associated with a business card, a personal card might suit your needs. But if you want to establish strong business credit, or if the perks and rewards of a business credit card could help your bottom line, it might be worth your while to make the switch.

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Meredith Wood
Meredith Wood is the Editor-in-Chief at Fundera, an online marketplace for small business loans that matches business owners with the best funding providers for their business. Prior to Fundera, Meredith was the CCO at Funding Gates. She is a resident Finance Advisor on American Express OPEN Forum and an avid business writer. Her advice consistently appears on such sites as Yahoo!, Fox Business, Amex OPEN, AllBusiness, and many more. Meredith is also the Senior Financial and B2B Correspondent for AlleyWire.