Business and personal credit cards function the same way but they vary in credit limits, credit reporting policies, bonus categories, and consumer protections. However, small business credit cards that cover expenses for freelance gigs, side hustles, and small business functions are similar to personal credit cards. But, both cards accrue interest and earn rewards the same way.
Additionally, both cards can be tax-deductible when you use them for business expenses. Also, in both, you are responsible for the charges made. But what are the main differences that you need to keep in mind as you apply for these cards? Below are some of them that you need to know.
Credit reporting policies
A personal credit card is reported every month to the three main consumer credit bureaus. However, when you have a small business credit card, this rarely happens. But some do report and you need to ask these questions as you apply for cards from various issuers. For instance, which issuers report to consumer and commercial credit bureaus? What is a net 30 account? Do they offer vendor credit and do they report to credit bureaus? You need to understand this, especially for your business. Notably, if you need your small business credit card to boost your credit scores and have a good credit history report. Ensure you use creditors that report to both commercial and consumer bureaus.
On both small business and personal credit cards, bonus categories like restaurant spending and travel are common. Some are more specific. For instance, business credit cards offer bonus rewards on online advertising, phone bills, and office supplies. While if you want bonuses at drug stores or grocery stores you will have to use your personal credit card. Ultimately, depending on your business spending you can get the best deals. Where your expenses are all over the place, choose a flat rate reward card as it will suit you best. Plus, this option is available for both small businesses and personal credit cards as well as a virtual credit card.
When it is time to pay your tax, you need to get your credit card statements for potential deductions. Generally, business credit cards make that very easy. Since, yearly, most issuers will give you a report of your spending. While personal credit cards rarely offer detailed reports. Plus, small business credit cards make tracking expenses easy in other ways as well. For instance, many small-sized business cards offer employee cards that are free with customizable spending limits. For personal cards, there is rarely such a feature.
Personal credit cards do not have as much spending power as small business credit cards. This is because the limits are based on business revenue and personal income, and other factors like creditworthiness. Also, revenue that is larger than your income, results in a higher limit than what you get on a personal card, where you only report personal income that you expect access to always. If your business has steep operating costs, such as spending a lot on inventory monthly, a higher limit could be useful.
0% intro APR periods
Introductory 0% APR periods are plenty on personal credit cards and are quite long as they can last up to a year. But not so with small business credit cards. Some business cards that offer 0% APR terms, in most instances apply to purchases and not balance transfers. In case the credit card offers promotional balance transfer APRs, it gets costly because they will charge balance transfer fees. Therefore, if you need a respite from fees or more time, personal credit cards will give you these options.
Consumer protection laws
The consumer protection laws do not apply to small business credit cards. However, most issuers extend consumer protections to a small business as a courtesy, therefore, as you search which one to apply for, keep this in mind, to choose those who consider it. Also on a small business credit card, you can be charged with excessive late fees for small infractions or your APR can change overnight. Thus, where you are unsure about your issuer’s policy, call to inquire further.