The Real Difference Between a Personal and Business Credit Card

If you’re a business owner, there are dozens of reasons to have a credit card. For one thing, they are a great way to keep track of all your business expenses in one place. They also offer opportunities to earn points or rewards on purchases you would make anyway. Not to mention, they can be an excellent option for financing your business, especially if you are in the startup phase. While business and personal credit cards may function in the same way, there are some key differences that set them apart.

You can typically get a much higher limit with a business credit card than with a personal one. This is because businesses, in almost all industries, have more expenses than an individual person ever would. They also have more capital coming in than individual people, so it makes sense that they’d have more spending power. 

However, before jumping into using a business credit card, it’s important to understand just how it affects both your business and personal credit.

While your personal credit card use will only affect your personal credit score, how you use your business credit card will affect both your business credit score and your personal credit score. This is because most business credit cards require a personal guarantee. This gives your business credit card company the security of knowing you’re personally responsible for paying off your business credit card debt if something should happen and your business can’t cover it. 

One of the biggest reasons people use credit cards these days is to earn rewards, in the form of cash back or points that can be used for everything from consumer purchases to travel. Personal credit cards often have great rewards programs, but if you’re a business owner, you’ll want the perks that are specifically geared towards business. For example, your business credit card may award the most points in spending categories that are typical of business owners, such as computer software, advertising spend, and office supplies. Personal credit cards, on the other hand, typically award the most points for spending in categories like restaurants, gas or groceries. If you’re going to earn points, you may as well earn in the categories where you spend the most. 

No matter whether you’re a business owner with dozens of employees or simply a sole proprietor, if you’re regularly making business purchases, you should have a business credit card. 

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