Business vs. personal credit cards: 6 major differences

Both personal and business credit allow you to borrow money, but there are important distinctions between them. Personal credit is tied to your individual financial history, while business credit reflects your company’s financial activity. Additionally, business credit often provides higher limits and may not affect your personal credit score unless a personal guarantee is involved.

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In this article, we explore the differences between business and personal credit, when the two mix, and what you can do to build business credit. Let’s get started.

6 differences between business credit cards vs. personal credit cards

While business and personal credit cards function almost identically, there are differences. The most obvious is that with a business credit card, the card displays the business name. That adds credibility and makes it simpler to incorporate the card into business budgeting software.

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Here are some other important differences between business and personal credit cards to keep in mind: 

1. Business credit cards can offer higher limits

Small business credit cards usually offer higher credit limits than personal credit cards, giving your business a higher line of credit to draw on for business spending. Even if your business doesn’t spend much month-to-month, a higher limit can come in handy for emergencies or when you might need to spend more on shipping or inventory.

2. Payment terms may be different

Payment terms may also be different for business credit cardholders, so it’s important to read the fine print of the terms and conditions. Some business credit card issuers require payment of the entire balance each month. That can impact your financial performance if you’re using the credit card to purchase inventory that’ll take several months to turn over. 

3. Business credit cards may offer better welcome bonuses

Many business credit cards offer better welcome bonuses than those of personal credit cards. This makes them an appealing alternative to personal cards, or a good second choice if you already use a main credit card and want to capitalize on the extra rewards. Just check the fine print to make sure you can spend enough to redeem the credit card benefit—typically, a certain amount of spending is required within the first three months of account opening.

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In addition to welcome bonuses, many personal and business credit cards offer other benefit—0% introductory APR, meaning you won’t have to pay any interest on your balance for a certain period of time—usually one month. During an intro APR period, you may also be able to perform balance transfers, allowing you to pay off existing credit card debt with no interest temporarily. Sometimes business credit cards offer interest-free periods that extend past the one-month mark, giving small businesses and startups some breathing room before they need to start making payments.

4. Business and personal credit cards report to different credit bureaus

Personal credit cards usually report card activity to the major consumer credit bureaus—TransUnion, Experian, and Equifax. Changes to your credit usage, payment history, and credit limit will affect your personal credit score.

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Business credit cards report to the business credit bureaus—Dun & Bradstreet, Experian, or Equifax. If you want to build a business credit score with Dun & Bradstreet, keep in mind that you’ll have to register for a DUNS number.

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Your personal credit is attached to your SSN, hence the personal aspect. When signing up for your business credit card, you will use the company’s EIN number. Not all businesses will have one and that is when you would use your SSN for your business as well.

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Different business credit cards also have their own reporting policies that you should familiarize yourself with. There are a few credit cards that can report to consumer credit bureaus, especially if you’re a sole proprietor. They may also report in the event of delinquency, for example. If your business was to file for bankruptcy, this means your personal FICO score could be impacted. It’s also a good idea to familiarize yourself with the business credit agencies and their different score ranges.

5. Business credit cards may offer more specialized rewards programs

Business and personal credit cards usually extend rewards in some of the same spending categories, such as dining, entertainment, airfare, and hotel expenses. But the best business credit cards usually also offer more targeted rewards on business-related purchases, like office supplies and advertising.

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Some personal and business cards limit the amount of rewards you can earn, such as giving 2% cash back on a specific amount spent and then reducing it to 1% after that. However, business cards often have higher caps in order to accommodate higher business spending, giving you the opportunity to earn more rewards if you spend more.

6. Personal credit cards have more consumer protections

Personal credit cards are protected by the Credit Card Accountability Responsibility and Disclosure Act of 2009 (CARD Act). Business credit cards are not. One of the stipulations in that legislation is that credit card companies can’t raise interest rates without warning.

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On the flip side, business credit card APR rates can go up at any time. Always check the specific conditions of your card instead of assuming it's similar or the same as your personal card terms and conditions. Remember, some business credit cards, like corporate cards, have no interest rates because they require full monthly balance payments.

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Business credit cards that report to consumer credit bureaus

Most business credit cards report to one or more of the business credit reporting agencies: Dun & Bradstreet, Experian, and Equifax. However, there are a few exceptions. All of Capital One’s business credit cards report to both the personal and business credit bureaus, except for their Capital One Spark Cash Plus and Capital One Venture X Business cards. These cards will only show up on your personal credit report if you don’t remain in good standing with them by making on-time payments.

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Business credit cards from American Express and U.S. Bank can also affect your personal credit score. If you make late payments on cards from these providers, that will show up on your personal credit report. Additionally, Chase will report to your personal credit report, but only if your card is especially delinquent.

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Can I get a business credit card as a sole proprietor?‍

Yes, you can get a business credit card as a sole proprietor. When applying, you’d typically use your own name as the business name and your Social Security number instead of a business tax ID. Lenders will consider your personal credit score and income when determining eligibility. A business credit card can be a great tool to help manage business expenses and separate personal and business finances, even for a sole proprietorship.

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Should you get a business credit card or personal credit card?

To start building business credit, sole proprietors and LLC founders should apply for a business credit card when they officially start their business. Before that, most credit card companies will only approve you for personal credit cards tied to your social security number. If that’s your situation, you can use a separate personal card for business expenses and keep receipts for all of your purchases.

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Companies with a more established track record and higher revenue might want to consider corporate charge cards instead of traditional business credit cards. These are cards that automate expense reporting and reimbursements. Like regular business credit cards, corporate cards report to the business credit bureaus, helping you build credit.

Factors to consider when choosing between personal vs. business credit cards

When choosing between a business credit card and a personal credit card, it’s important to consider your goals for using the card. Here are some key factors to consider:

• Purpose: If you’ll be using the card for business purchases, it’s usually best to choose a dedicated business card.
• Credit limit: Business credit cards offer higher credit limits to accommodate business needs.
• Rewards and perks: Make sure to compare the rewards programs. Some credit card offers include cash back, travel rewards, and business-specific rewards categories.
• Business credit score: If you need your credit card to help you build business credit, you’ll want to look for a business credit card that reports to the major business credit bureaus.

Keep in mind, it is much easier to build business credit than personal credit, since fewer variables are taken into account for businesses.

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Is it okay to use a business credit card for personal use?

While there’s no law prohibiting it, it’s generally not advisable to use a business credit card for personal expenses. Mixing business and personal spending can lead to a variety of potential issues, including but not limited to: tax implications, violations of card agreements, and accounting problems.

Get ready for your next step with Ramp

If you’re interested in building business credit, it’s worth considering applying for Ramp’s corporate card. Our all-in-one business card and expense management platform comes with features that traditional credit cards can’t provide.

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For instance, some business credit cards offer free employee cards with customizable spending limits—but those aren’t spending controls. They simply put a limit on how much an employee can spend, not where they can spend it. Ramp corporate cards can do both, making them the next step in P&L management for your company.

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Some business credit cards can also be integrated into accounting software to track expenses. But that doesn’t provide a receipt backup or allow your company to view expenses in real-time. Most integrations send data the following day, which is too late to correct spending behavior that could be costly to your business.

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Ramp allows you to set employee spending limits, select specific vendors where corporate cards can be used, and see expenses on a real-time dashboard as they occur. Our system also reimburses automatically, and no expense reports are required because everything is tracked internally as it happens.