Having a credit card for your business can help you cover certain expenses; however, you have two credit card options to choose from: business credit card or personal credit card. On the surface, they both may seem the same, but they are quite different. So, what are those differences between the two credit cards? Here is what you need to know.
The Differences Between Business and Personal Credit Cards
Rewards and Benefits
Business credit cards have the same rewards and benefits as personal credit cards such as travel rewards and point-based rewards however business credit cards offer business focused benefits. This means you will get more value from business credit cards by spending in business categories such as office supplies, computer software and hardware, marketing, advertising and more. You can also use business travel cards to get points and miles for your business travel and get hotel stays, future flights, and rental cars with your points.
Personal credit cards also have rewards, but they are more geared to expenses you make as an individual or family. For example, personal credit cards will give you rewards by purchasing gas, groceries, retail purchases and more.
Policies and Protections
A personal credit card is offered by government consumer protection policies. The Credit CARD Act of 2009 is a federal law that has all the credit card company responsibilities and consumer rights. This law only focuses on personal credit cards, not business cards.
Business credit cards lack protections that personal credit cards offer. For example, personal credit cards typically have fraud protection and identity theft. They also have purchase protection and travel insurance benefits.
Business credit cards have a higher credit limit than a personal credit card. The average limit for a business credit card can range from $10,000 or more if you are responsible with your use. Business credit cards are similar to lines of credit where you have the flexibility to spend and repay. Paying your credit card in full each month will help you be eligible for more rewards.
Benefits of Business Credit Cards for Your Business
It is smart to keep your business expenses and your personal expenses separate. There are many benefits of using business credit cards to help your small business.
- It is convenient to use because you can pay for daily and one-time or occasional expenses.
- Since it is similar to a working capital loan, it is flexible.
- Business credit cards look at your revenue and expenses over the past year or longer to determine if you are eligible.
- Benefits for your business includes product discounts, cashback, point-based rewards, and travel rewards.
- It can make record keeping easy
Having a business credit card for your business can help strengthen your business with the perks and benefits they offer. If you use it responsibly you can establish your credit profile and history. To do this you must make on time payments and have a steady cash flow. If you miss a business credit card payment, it can hurt both your business and personal credit.
The Bottom Line
Understanding the difference between a business credit card and a personal credit card is important and will help you be aware of the best choice for your business. In general, you should separate your business expenses from your personal expenses and have separate cards for each. Business credit cards are helpful for small businesses by maximizing purchases to get points, miles, and rewards. If you have decided to pursue a business credit card, the next step is to find one that will fit your business’s needs.