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Business credit cards and personal credit cards. How are they different?

Business credit cards and personal credit cards. How are they different?
By Karan Kapoor

You are already aware as an entity that using a personal credit card wisely will help you improve your reputation. And whether you are a small business owner or an entrepreneur, you can help secure your money by choosing between a personal and corporate credit card to fund your business expenses.

Functionally, the disparity between corporate and personal credit cards is not important. For all, you are permitted to make unlimited use of a certain amount of credit and are expected to reimburse everything you have borrowed — often all in full and often with minimal monthly payments.

Digging deeper, however, you can discover a few complexities that affect your decision.

Here is what you need to do about company vs. personal credit cards, and how you can pick the one that suits you.


Business and Personal credit card, their terms and conditions 

It is important to look into the fine print on every credit card and ensure that you comply with the terms and conditions. The terms of a business credit card can specifically mandate that the card be used for business expenses only.

And even though a credit card issuer does not indicate what the card should be used for, having your company expenses apart might be safer for your finances. Mixing corporate and personal activities can make it difficult or time-consuming to trace the accounts and expenditures.


Credit Card Act

The Credit Card Act protects the customers on their credit cards from fraudulent credit card activities. Yet corporate credit cards do not apply.

As a result, even though you have paid six straight monthly payments following a late payment, the company credit card issuer will increase the fee without notice or refuse to lower the charge.


Build your business credit 

A personal credit card will help you develop your reputation, as an entity. Responsibly using a card will help you improve your credit score and generate a favorable credit report.

The same is true of a corporate credit card, as a business owner. If you are looking to apply for a business loan, lease, or asset lending or you would like to expand your credit lines to secure more attractive credit terms, first you will need to develop to set up bank loans

Holding a business credit card under the official business name of your LLC or company, and using your employer identification number will help you set a stable payment background for your firm, as long as the lender reports to firm reporting agencies.

Other types of borrowing can also be used to create business credit, including dealer credit, retailer credit, retail credit, and service credit.


Best rewards for business owners 

If you have a credit card with personal benefits, you could receive miles, points, cash back, and more. The same goes with a credit card firm.

If your company spends heavily on materials, card incentives can turn out to be more enticing. Most corporate credit cards provide discounts for company purchases, including generous incentives such as cashback including airline miles.

Other incentives may include work vouchers, the right to spend over the credit cap, access to automatic company spending rebates, Global Entry or TSA Precheck credit, cost control, car rental policies, and more.


Accessing more business credit 

The higher overhead company can need access to a higher credit limit — something that may not be available on a personal credit card.

For example, once you are accepted for any Chase business credit card, the initial credit limit available is $3,000, which raises to $25,000 if you have more information. Wells Fargo offers a credit limit on your business credit card between $2,500 and $50,000.


Personal liability for business expenses 

Naturally, even if the purchases were made for your business, you are responsible for your credit card spending. You and any employees you have authorized to use the account when that clause is included in the terms of the credit card may also be personally responsible for purchases made by you on your business credit card. Personal liability comes into play if your business is unable to repay the purchases made on your credit card, for some reason.

Since you are personally responsible for the expenditure on business credit cards, it is important to spend within the budget of your business.


Things to remember while considering a business credit card 

In many cases, your business should use a business credit card as it allows you to take advantage of the business benefits while keeping your personal finances separate

More specifically, you may want to get a credit card for your business when:

  • You need to streamline the tracking of expenses
  • You want to let employees make purchases for business
  • You have many particular business expenses that can make money
  • You need a higher credit limit to cater to your business expenditure


If you have a small business or are a very low overhead entrepreneur, you may not need a business credit card. You can use your credit card in person if:

  • You do not need to construct company loans for bigger future funding
  • You do not have many industrial costs
  • You are a sole proprietor and do not file for your company a different tax return
  • You do not plan to incur a corporate credit card charge


What is the right choice?

If you are an entrepreneur or small business owner, the use of a company vs. personal credit card is an important choice to consider. You could be given more protection by your personal credit card, while your business credit card will help you build a business credit report. Both come with advantages and drawbacks so it is necessary to weigh all the choices before you sign up.