If you’re looking for a new credit card for your small business, you technically don’t have to get a business credit card, especially if you just want to separate your personal and business expenses.

But the benefits that come with small business credit cards should make any business owner reconsider using a personal card to help run their business. 

Understanding the differences between personal and business credit cards can help you determine which is the right fit for your company card.

Differences Between a Business Credit Card and a Personal Credit Card:

On the outside, business credit cards may seem indistinguishable from personal credit cards. But the differences in how the two function and how they can help your small business are big enough that you could miss out on a lot if you’re not using a business credit card.

Here are some of the major differences you’ll find between the two options.

A Business Credit Card Application Needs Details About Your Business

When you apply for a business credit card, the application will typically require information about your business and you as the business owner.

For example, if your company has an employer identification number (EIN), you’ll want to provide that on the application. You may also be asked to provide some or all of the following information:

• Business name
• Business address
• Annual revenues
• Expected monthly expenses
• Number of employees
• Names of each business owner, along with their share of ownership, Social Security numbers, and address

Business Credit Cards Usually Have Higher Limits

When you’re just starting out, you may not have a lot of business expenses. But as your business grows, a personal credit card likely won’t give you the credit limit you need to keep up with your purchases.

What’s more, if you’re constantly bumping into your credit limit on a personal credit card, it could have a seriously negative impact on your personal credit score. 

Whether you already have a lot of expenses or you anticipate your expenses growing over time, you’re likely better off with a business credit card.

Business Credit Cards Can Affect Both Your Personal and Business Credit Scores

One of the biggest benefits of using a small business credit card is that it can help you establish your business credit history, as long as you have an EIN and add it to your application when you first sign up. 

Building your business credit score early on can make it easier for you to qualify for business financing as your company grows, and a personal credit card can’t help you do that.

That said, business credit cards can also impact your personal credit score. While some major business card issuers don’t report any activity to the consumer credit bureaus, you can generally expect a hard inquiry on your personal credit reports when you submit an application.

In most cases where business credit card issuers report to the consumer credit bureaus, it’s when you’ve missed a payment, or you’re seriously delinquent on your account.

However, some card issuers, including Discover and Capital One (on most cards), report all of your account activity to the personal credit bureaus. 

Depending on how you use the card, it could end up hurting your personal credit score, so it’s important to consider credit reporting as a major factor as you shop around for the right company credit card.

Small Business Credit Card Benefits Are Tailored to Business Needs

Many business credit cards offer rewards and features that are better designed to suit a small business owner’s needs compared to a personal credit card.

For example, instead of getting bonus rewards on things like groceries and restaurants, you might get a card that offers extra cash back, points, or miles on things like advertising, shipping, and office supplies. 

Some business credit cards also offer bigger sign-up bonuses. Though they also typically have a higher spending requirement to earn that bonus — which small businesses will have an easier time accomplishing.

Finally, many small business credit cards come with ancillary benefits that can be beneficial for your business. For example, you may get more detailed expense reports and the ability to seamlessly sync your account to a third-party accounting software like Quickbooks.

You can also typically get free employee cards tied to the account, with the ability to set limits on how much your employees can spend. 

One area where personal credit cards do better is with 0% APR promotions. Although there’s a handful of business credit cards that offer introductory 0% APR promotions, they aren’t as plentiful as with personal credit cards.

As you look for the right small business credit card, consider the rewards program and business-specific card features to determine which card will give you the most value.

No Consumer Protection Policies on Business Credit Cards

One area where personal credit cards have an advantage is in the consumer protections that they get. The Credit CARD Act of 2009 provided a major overhaul in how credit card issuers are allowed to market credit cards, change interest rates and fees, and more.

Unfortunately, though, those protections only apply to personal credit cards. 

For example, in cases where a credit card charges a penalty APR, the card issuer can’t charge the higher rate until you’ve been late at least 60 days and the issuer sent you a notice 45 days in advance of the increase. 

With a business credit card, missing just one payment could trigger the penalty APR. 

The good news is that some major small business credit card issuers have matched some or all of their terms to provide the same protections that consumers get through the CARD Act. 

But it’s important to read the fine print on any credit card you’re thinking about getting to get an understanding of how you’ll be protected.

Most Small Business Owners Need to Use Personal Credit to Get a Business Credit Card

Some small business owners may find business credit cards appealing because they want to put all of their debt under the business instead of their own.

Before you continue with that reasoning, though, it’s important to note that most small business credit cards require a personal guarantee when you apply. This means that if your company can’t pay the monthly bill, you’re responsible for paying it with your personal assets.

It also means that you’ll need to provide your Social Security number on the application, and there will be a hard inquiry on your personal credit reports when you submit your application.

And, as previously mentioned, the card issuer may report other information about the account to the consumer credit bureaus, which can impact your personal credit score.

If You Build Business Credit, You Can Qualify for Business Credit Cards That Don’t Impact Personal Credit

If your company is large enough and you’ve established a solid business credit score, you may be able to get a corporate credit card that won’t impact your personal credit.

Corporate cards are typically reserved for companies that generate several millions of dollars in revenue each year. Because they don’t require a personal guarantee or credit check, they also typically require a solid business credit history to get approved.

Here’s the thing, though: You can’t build a business credit score with a personal credit card, so even if you want to use one for other reasons, building your business credit history is a compelling reason to go for a business credit card.

It’s also a good idea to use other forms of business financing to supplement your progress on your business credit cards. For example, the Credit Strong Business credit-builder account can provide a long-term benefit to your credit history.

When you open the account, the $10,000 loan amount will be placed in a savings account and locked. You’ll then make low monthly payments over a 60- or 120-month period. Once you’ve paid the loan in full, you’ll get the full loan funds, which you can use to invest in your business.

Can I Use a Personal Credit Card for Business?

You can absolutely use a personal credit card to cover your everyday business expenses. 

In cases where your business is still new, and you simply want to separate your personal and business expenses, using a personal card for business purposes only can be a great way to establish that separation.

But because personal credit cards have lower credit limits, don’t build business credit history, and don’t have rewards and features that are tailored to the needs of a business owner, they’re generally not recommended for long-term use.

That doesn’t mean you need to open a business credit card now but take the time to think about the needs of your business and whether a business card might be a better fit for you and your company.

Is it Worth Having a Business Credit Card?

If you’re serious about building your business, having a business credit card can have a significantly positive impact on your company’s growth.

Here’s a quick recap of how a business credit card can help you:

• Provides working capital: A business credit card can help with cash flow management and give you more time to pay off your purchases.
  
  And as long as you pay your bill on time and in full every month, you’ll never have to pay interest. Compared to a personal credit card, you’ll typically get a higher credit limit, which means more spending power.
  
• Builds business credit history: As you use your account responsibly and pay your bill on time every month, it can help you establish a business credit history, which will be crucial later on when you have more extensive capital needs.
  
• May not impact personal credit: Depending on which card issuer you apply with, your business credit card may not impact your personal credit score at all. Just be sure you research your options to find one that doesn’t put your personal credit in jeopardy.
  
• Offers business-specific features: If your business spends a lot in certain areas, you may be able to find a business credit card that offers bonus rewards on those purchases.
  
  You’ll also typically get extra perks that are better suited to the needs of a business than a regular person.
  
• Better separates business and personal expenses: You can use a personal credit card to separate your business and personal affairs.
  
  But it might be easier to do it with a business credit card when you know that card is specifically and legally tied to your company.

If you’re thinking about getting a new credit card for your business, consider getting a small business credit card instead of a personal one. Be sure to take your time to research your options before you apply, though. 

While personal credit cards are more plentiful than business ones, there are still a lot of business card options available, and it’s important to find the one that fits best with your business spending and needs.

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