What is the Difference Between Business Credit Card and Personal?

Comparing a Business Credit Card vs. Personal Credit Card

As a new entrepreneur hoping to start a new enterprise, you may be surprised by the number of upfront expenses that a company incurs. There are several options to finance these startup costs, and you may be tempted to turn to your personal credit card to get things rolling. However, choosing a business credit card may be the better option for these initial ongoing payments. 

So, how do you choose between a business credit card vs personal credit card?

Both offer the same primary functions, but understanding how a business credit card can help you keep track of your expenses can make a huge difference in managing your company. 

Today, we will discuss the difference between a business credit card and personal credit card and how to pick the right one that suits your needs. 

What’s a Business Credit Card? 

At its core, the business credit card definition is simply a credit card used with a specific purpose of paying business expenses, as opposed to personal ones. 

What is a business credit card for? The functions of a business credit card vs. a personal card are similar, in so much that they’re both used to make purchases and have a monthly repayment schedule. A business credit card will offer a separate line of perks that many business owners find useful. 

Surprisingly, you don’t even need to own a business with a tax ID number to qualify for a business credit card. If you operate a side gig as a freelancer or operate as an independent contractor, you may not have a registered company, but you’ll still accrue business expenses. 

Let’s take a closer look at the differences between a business credit card vs personal credit card. 

What is the Difference Between Business Credit Card and Personal Credit Card?

What is a business credit card’s advantage over a personal card? When comparing a corporate credit card vs a personal credit card, there are relatively straightforward distinctions to keep in mind. 

Business Credit Card: 

The primary benefit of choosing a business credit card is that they are designed to provide the maximum rewards for paying business operations. Along with a typically higher spending limit, you’ll receive rewards for paying office utilities, marketing, and other business-related expenses. 

Most issuers are aware of the diverse aspects of operating a new company. Their business credit cards will generally come with a more significant welcome bonus to get things started, employee cards so you can decentralize, and end-of-year itemized reporting to keep your books in order. 

However, it’s best to keep in mind that applying for a business credit will still result in a hard inquiry into your personal credit rating, and some issuers will still report your credit behavior to personal and business credit score companies.

Personal Credit Card:

It’s not mandatory to use a business credit card to operate a company. There have been many startups that relied on a personal credit card to finance their initial business endeavors. The counterpoint of using a business credit card vs a personal credit card is that business credit cards typically offer fewer protections and are levied with higher rates and fees. As business cards aren’t nearly as regulated and monitored as personal credit cards, lenders can change the APR and fees with less scrutiny. 

While this may make you think twice before choosing something like an SPG business card vs personal for your business expenses, note that you’ll be missing out on the significant business incentives offered under a business credit card. 

The Bottom Line

While both business credit cards and personal credit cards can generate rewards, accrue interest in a similar manner, and require balance payments in a timely manner, the winner of a business credit card vs personal credit card comparison is ultimately a business credit card. 

Why Should You Use a Business Card for Your Small Business Needs? 

There are several reasons why someone would choose to use a business credit card, including:

Bookkeeping Benefits

Whether you plan on tackling your business’s taxes yourself or you’ve hired an accountant, you’ll be happy to have a business credit card that itemizes all of your purchases at the end of each year. This is a feature not offered by most personal credit cards. 

Employee Cards

Many business credit card lenders will also offer employee cards with customizable spending limits. This is an additional way to track your company spending without having to worry about an employee making charges outside an allotted limit. 

Building Business Credit

Even if your personal credit and business credit are linked, a personal credit card typically won’t help build your business’s credit rating. 

In the same way that building up a healthy personal credit rating will likely make you more eligible for various financial products and better rates, your business can do the same. By having a business credit card and paying it down on time, your business will be able to secure better terms on loans and lines of credit.

L3 Funding is Your Financial Solution

Choosing between a business credit card vs personal credit card isn’t your only option for solving your business’s financial issues. L3 Funding has curated several merchant funding solutions to help small business owners every day. If you want to learn how to get your business up and running, contact us at L3 Funding.