Business Credit Card vs Personal—What’s Best for YOUR Business?

If you have ever wondered about the difference between a small business credit card vs personal credit card, then this post is for you.

Both kinds of credit cards have rewards and downsides. But in the end, your business will do the best with a small business credit card. Here’s how.

Difference 1  — Your Credit Limits

The credit limit for a small business credit card is a lot higher than it is for a personal credit card. As in twice as high, or more. But this difference makes sense.

A credit card issuer will base limits on your likelihood to pay them back. And while both a business and its owner may have the best of intentions in terms of paying back any credit, a business has the potential to bring in more money, and faster.

Consider the kinds of financial rewards most people get at their jobs. And then consider how much a business can turn around in terms of profit. If a product or service really starts to take off, a business could double its assets. 

But rank and file employees probably won’t get financial rewards any higher than—maybe—an additional 25% on their salary.

Hence a business is seen by a credit issuer as being a better risk for paying back the higher bills that inevitably accompany higher credit limits. A business can also pay virtually any annual fee, even on a business platinum card.

A business can often have more control over whether they will do better financially, versus an individual. An employer could let you go at any time. But businesses have plans.

Difference 2 — Utilization Rate

In personal credit, one of the scoring factors is what is called utilization rate. This is a simple division problem: credit you’re spending, divided by total available credit. Both for each card, and for all cards a person has, the utilization rate matters to the personal credit reporting agencies.

In business, this is referred to as debt to income ratio. And in business credit, the amount does not make a difference. While businesses should watch these numbers, it’s not due to any impact on a business credit score.

Rather, it is due to a potential impact on the business’s finances in general.

With a small business credit score, what matters most is the speed with which a business pays back any credit used. The Dun & Bradstreet PAYDEX score also weights bigger bills more than smaller ones.

For the rewards of a better PAYDEX score, the faster you pay off the bigger credit card bills, the better your score will be.

And while your payment history will also matter to the consumer credit bureaus, so do:

  • Utilization rate (amount of credit owed)
  • Age of accounts
  • Credit mix
  • New credit

Keeping older accounts open, paying bills on time, having a diverse portfolio of credit, and not getting too many new credit cards at once will result in a better personal credit score.

Difference 3 — Reporting

Business credit cards will report to business credit reporting agencies. The three largest credit reporting agencies for business are:

  • Dun & Bradstreet
  • Experian for business
  • Equifax business

In contrast, personal credit cards will report to the personal credit reporting agencies. The three largest credit bureaus for individuals are:

  • TransUnion
  • Experian personal
  • Equifax personal

Sometimes, people get a credit card which they believe to be a business credit card, but those are actually personal credit cards with the name of a business on them. If a card reports to TransUnion, and not to Dun & Bradstreet, then by definition it is not a business credit card.

Personal credit reports will show credit issuers and balances individually. But on business credit reports, it’s aggregated balances.  

Also, under the Fair Credit Reporting Act, you are entitled to one free credit report per year from each of the three main personal credit reporting agencies. But that is not the case with business credit. 

With business credit, you must pay for copies of your credit report. That can get pricey extremely quickly. And, you will want to review your business credit reports frequently, to check for errors. Monitoring is the best way to do this.

Fortunately, Credit Suite offers business credit report monitoring for 95% less than what it would cost at the business credit reporting agencies a la carte

Difference 4 — The Availability of Business Expense Management Tools

Many business credit cards now come with the ability to link your corporate credit card directly with your business accounting software, such as Quickbooks. 

Another feature of business credit cards which sets them apart from personal is the ability to assign credit cards to members of your team. These can (often) even be a virtual employee card, with no plastic whatsoever. 

These cards for employees can often come with features like being able to control employee spending or only allow qualifying purchases in one area. For example, if an employee goes on a business trip, paying for the room and not any movies watched therein.

With some business credit cards, employees may be restricted to only using them to pay certain vendors for eligible purchases. This prevents misuse and, at the same time, assures a company only works with preferred vendors.

Another useful feature of business credit cards is the ability to cancel employee credit cards quickly, in the event of loss or theft—or the employee is leaving the company.

A business card might allow for receipts to be loaded directly, via taking a picture with a smartphone. 

With a Ramp business card, an entrepreneur can even get text messages to remind them to submit receipts for spending.

Difference 5 — Personal Guarantees

This may be, for the most part, a distinction rather than a difference.

With personal credit cards, your personal assets are, understandably, on the line. If you ever default, even the best credit card issuer will go after you for payment. And if you do not have sufficient cash, they will take your personal property to satisfy the debt.

In the automotive arena, this results in a repossession, or repo, of the unpaid-for vehicle.

With small business credit, the only time your personal assets are going to be on the line is if you have provided a personal guarantee. A personal guarantee is when you give the credit issuer your Social Security number.

The credit issuer will then pull your personal credit report. If they like what they see, you will be able to get a business credit card. But if you default, the credit issuer will come after business and personal assets.

But there are business credit cards where you do not have to provide a PG. Or, you may be able to get out of a PG by putting down money to secure a card, or proving a certain degree of profitability. Starter vendors often have means by which you can avoid a PG. 

As a bonus, they might not have an annual fee—but they also aren’t likely to be great for a balance transfer.

Difference 6 — Effects of a Credit Pull

New credit is a percentage of how a personal credit score is calculated. This includes credit card pulls. But there is a difference between hard and soft credit pulls.

A hard credit check is when a lender pulls your credit report because you have applied for new credit. This includes a credit card, a car loan, a home loan, or an increase to an existing line of credit. A hard pull will affect your credit score for 12 months.

A soft credit pull, on the other hand, is when you check your own personal credit, or you use a credit monitoring service. It will not affect your credit score. But, just like with a hard inquiry, it will stay on your credit report for two years.

Merchants may also use a soft credit pull to determine if you are eligible for new products—but in such a case, you will have already been approved for credit with them.

Experian business credit (and FICO SBSS) is partly based on personal credit. So, if your personal credit shows multiple inquiries, it can drag down your small business credit score. Often, the limit on inquiries is six within a given time frame.

Difference 7 — How Long it Takes for Transactions to Show Up on Credit Card Bills and Credit Reports

When it comes to business credit vs personal, the amount of time it takes for a purchase to report is yet another difference.

When you open a new credit card account, it doesn’t appear on your credit right after account opening. It typically won’t show up until 30 to 60 days after you’ve opened the account.

But the exact timeframe can vary by lender, your card’s billing cycle and when the account is reported to each of the three bureaus.

For personal credit, personal purchases made before the opening date or after the closing date will appear on your previous or next credit card statement, respectively. There are usually 30 days in a billing cycle.

But business credit differs. It can take a good 30 days to get a DUNS number. But you need more than a DUNS number for business credit. You are also going to need transactions.

It can take over another 30 days for transactions to show up on a business credit report. When you’re first starting out, you need 3 payment experiences + a DUNS number before you can get a PAYDEX score.

This time frame is the same whether you pay your statements on time, or not.


Is it Illegal to use a Personal Credit Card for Business?

Absolutely not. There are no personal credit police.

But the best business credit card usually offers much better cash rewards and benefits. For more bonus points, ultimate rewards and the like, you will generally do better with a business card.

Also, using personal credit cards for your business expenses will drive up your utilization percentage. Any business spending can often be very high, and a personal card will tend to have lower limits. This drives the percentage up even more.

As a practical measure, using personal credit for business expenses, or business credit for personal, can result in a commingling of funds. 

Is it Better to have a Personal Credit Card or Business Credit Card?

This is like asking if it’s better to have a front axle and a rear axle on your car. You get rewards from having both, in their own ways.

A small business owner will often float interest free loans for business purchases, particularly when starting out. Using personal credit cards makes that all too easy. Both personal and business endeavors can end up in debt.

Having a separate business credit card means you are proactively working toward your business’s future—a future independent of your personal finance and based, instead, on your business’s payment history.

Keep personal credit (with its often lower annual fee) for a personal expense or emergency, and business credit for regular business expenses. 

Is it Worth Having a Business Credit Card?

Absolutely! Between cash rewards, higher limits, and no issues with your utilization ratio, small business credit cards have a lot to offer. 

The existence of spending management tools is another plus for business credit cards. And, of course, not showing up on your personal credit reports is another positive. 

Business credit cards are meant to adapt and grow with your business. Your business success is in the card issuer’s best interests, too.

Management tools and rewards can evolve—and if you are a long-term business credit customer in good standing, customer service may be willing to work with you to develop even better rewards and spending tools.

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