Business Vs Personal Credit Cards

Compare Banks compared the benefits of business to personal credit cards.

Updated: May 21, 2024
Matt Crabtree

Written By

Matt Crabtree

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You've got a thriving company that you started from the ground up. You’ve mastered online payment systems. Now, you’re debating whether or not to switch to a company credit card from your personal one. 

If you understand the implications of debt, then if you play your cards correctly, understanding the distinctions between corporate and personal credit cards may help you save time, energy, and money.

While both corporate and personal credit cards serve the same basic purpose, understanding the distinction between the two is important.

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Benefits of Business Credit Cards — At a Glance: Pros and Cons vs Personal Credit Cards

Pros

✔️ You could get a bigger credit line.

✔️ If you use it often, you may raise your business credit score and qualify for lower interest rates on credit cards and business loans in the future.

✔️ If you need more cards for your squad, you can acquire them.

✔️ You can keep your business and personal funds separate.

✔️ Possible integration with financial tracking apps like Monzo.

✔️ Business-specific bonuses and perks.

Cons 

❌ If you sign a personal guarantee for a corporate credit card, you might still be held personally liable for the debt.

❌ No guarantee on purchases.

❌ Fewer credit card offers are available to you at this time.

❌ It may cost extra to use a corporate credit card.

Business vs Personal Credit Cards — 6 Ways in Which They Differ

The difference goes beyond the embossed name on the front of the card. From the legal jargon to the actual kilometres travelled, there are subtle variations that need careful research before committing oneself or one's firm.

#1 Credit restrictions

Your business credit limit is based on both your personal income and the money your company generates. Since business cards should be able to purchase a little more, this feature enables you to increase the limit.

Your company might benefit from a higher credit limit by receiving deeper discounts from suppliers, maintaining adequate stock levels, and receiving replacement parts for broken machinery more quickly.

Personal guarantees on business credit cards ensure that the debt must be paid even if the company that used the card goes bankrupt. Make sure you read the small print and know exactly what you're agreeing to before signing anything.

#2 Qualifications

A personal credit card can be requested with little trouble. You should only be 18 or older and be able to provide evidence of income to participate. Credit cards are available even if you have a poor credit history, thus a strong credit score isn't required.

More hoops need to be jumped through in order to get a corporate credit card. Provide financial data, such as income and balance sheets, to demonstrate the health and viability of your company.

To qualify for a business credit card, many financial institutions require that your company has been open for at least a year. It's possible that registering your company and getting a UTR number are additional necessities.

#3 Policy reporting and consumer protections

The four main credit reporting agencies — TransUnion, Experian, Equifax, and Crediva — are informed of your behaviour when you use a personal credit card.

However, not all corporate credit card activity is reported to the three main credit agencies. However, commercial credit bureaus will be notified of your actions. When a corporate credit card goes into default, the card issuer may also report it to your personal credit.

Not all consumer protections, including those under the Consumer Protection Act, apply to corporations. This law may provide some security for sole proprietorships and partnerships.

#4 Bonuses and benefits

Despite the fact that a greater range of incentives could be accessible with personal credit cards, the higher spending volume associated with a corporate credit card makes it far simpler to amass rewards. However, before deciding on a business credit card, be sure you know how the incentives are limited.

#5 Auditing

Proper accounting is essential for business owners who provide company credit cards for employees to use for petty cash, stock purchases, petrol, or any other incidental costs that may occur. Each employee's credit card spending may be monitored separately with company credit cards thanks to individual sub-accounts.

In addition, you may control employee spending by establishing unique limitations for each credit card. All the individual statements and the master statement are made accessible at the conclusion of the statement cycle, streamlining bookkeeping.

#6 Price disparities

To better compete, several issuers of personal credit cards have eliminated yearly fees.

Business credit cards are not necessarily subject to the same restrictions. Business cards with no yearly costs are the exception, rather than the rule. There are almost any company credit cards that include incentives like a 0% APR promotional period on debt transfers and new purchases. If they do, it's probably only one of the possibilities.

A credit card's “APR” refers to its annual percentage rate. It's a percentage that represents the total cost of carrying a balance on your card, including interest and any other fees.

#7 Can a personal credit card be used for company purchases?

If you want to be on your accountant's bad side, use your personal credit card for company expenses.

Using a personal credit card for business purposes may be a complicated accounting exercise, particularly if your stock purchases and other company costs are mixed with your personal spending.

Which Kind of Credit Card is Better: A Company Card or a Personal Card?

Credit cards that are issued to individuals are optimal for individual expenditures, whereas corporate credit cards are optimal for company expenditures.

You should apply for a credit card if:

  • As a solo proprietor, you want to maintain a wall between company and personal funds.
  • A corporate credit card is not currently available to your company.
  • All the advantages of a company credit card pale in comparison to the incentives given.
  • The typical costs associated with company credit cards are ones you'd rather avoid.

A business credit card is a good idea if:

  • You're making it harder on yourself to keep track of finances by mixing corporate and personal costs.
  • A sizable credit line is required to handle your business needs.
  • You need free extra ID cards for your employees.

In many business cases, when comparing business and personal credit cards, the advantages of the former clearly win out.

Business vs Personal Credit Cards: The Verdict

Company credit cards are intended for company use, whereas personal credit cards are intended for personal use.

A business credit card may help you better manage your company's finances by providing you with a bigger credit limit, access to a business credit score, and improved tools for managing your company's finances (such as extra cards and accounting software integrations).

However, there are caveats that you should be aware of. Your transactions are not covered if you use a business credit card. Business credit cards are often more expensive or have more stringent requirements than consumer cards.

While your company is still young and you don't have to issue a lot of credit cards to staff, it may be OK to use your own card for business purposes. As your company expands, though, a corporate credit card may prove to be a more efficient and economical choice.

See how to save money in 2024.

Related Guides:

FAQs

How would using a credit card for my company affect my personal credit?

What happens if my company goes into debt on my personal credit card?

What makes a credit card application for a company different from an individual's application?

Can I make business purchases using my personal credit card?

Can I make personal charges on my company credit card?

Can you have separate corporate and personal use on the same credit card?

What are the steps to getting a company credit card?

What is a secured credit card?

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