Personal and Business Credit Cards: What’s the Difference?
business credit cardWith so many different kinds of credit cards out there, from cash back and travel rewards to 0% intro APR, it can be difficult to decide which card is best for you. To make matters more complicated, you might come across small business credit cards that offer similar rewards but that are marketed toward people running a business who need to make big purchases.
Depending on the kinds of purchases you make, and how frequently you make them, a business card might be useful to have, even if you don’t run one.
More similar than you might think
The biggest difference between the two types of cards is that the Credit CARD Act of 2009 does not apply to business cards, but focuses on benefiting personal consumer card users. This means interest rates can change frequently and without notice with a business card. That’s a big drawback if you consistently pay back interest on your purchases. By law, personal cards have their fees and interested rates capped.
For small business cards, you’re more likely to get rewards that are tailored toward business purchases. For example, many small business cards give you cash back on office supply expenses and travel. A handful of cards also come with great sign-up bonuses, but annual fees might be higher; some cards have fees as high as $450, although like personal cards, they are sometimes waived the first year.
Personal consumer and small business cards are similar when trying to qualify. When you apply for the card, the bank issuing the card will look at your credit score, sometimes from all three major credit bureaus – Equifax, Experian, TransUnion. In both cases, a hard inquiry will be put on your credit history, which can temporarily lower your credit score. As with personal cards, most business cards are lent to an individual, not the business, so you can be held personally liable for the debt. Be mindful of that if you’re using a credit card for a small business.
A drawback, however, with business credit cards is that many times your account history is not reported to the three major credit bureaus unless it’s negative in nature, such as a missed payment. That means if you’re hoping to improve your credit score with a business card by showing responsible use of it, don’t count on the same upside you’d get with a personal card.
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