Business Credit Cards vs. Personal Credit Cards

Many credit card issuers offer personal and corporate credit cards, but these cards will often be very different. 

A small business card may have a higher annual fee, higher credit limit, different rewards earning categories, and more. They may also differ in credit reporting, scoring, and legal terms. 

It is essential to know these differences, how they impact your credit, and your approval odds. 

What is the Difference Between Personal and Business Cards?

One key difference is where the credit card companies report. Business credit cards will sometimes report to business credit bureaus, and personal credit cards will only report to consumer credit bureaus. 

There are a few exceptions to this rule. Some business credit cards will send credit card information to the consumer credit bureaus, so you’ll want to read the fine print before you apply. And some business credit cards won’t report to the business credit bureaus unless you default on the payments.

Business credit cards should be used to finance only business purchases. This helps you keep your business expenses separate from your personal expenses. 

Now, let’s take a closer look at the key differences between business credit cards and personal credit cards. 

Different Application Details

A business credit card application needs details about your business.

When applying for a personal credit card, you’ll need to enter your personal information. This includes your name, birth date, Social Security number, address, and income. 

The application process for business cards is similar, except the information required are your business details. While each credit card company is different, they can request any of the below information. 

1. Business name– your business’s legal name or your name if you are a sole proprietor. 
2. Business type– LLC, sole proprietor, S-corp, etc.
3. Industry type 
4. Contact information– your business address and phone number.
5. Time in business– either the date you opened the company or the duration you have been open.
6. Number of employees
7. Tax ID– either your EIN or your SS number if you are a sole proprietor.
8. Business revenue– the annual revenue amount for your business.
9. Business expenses– an estimated guess on how much you spend monthly.
10. Personal income– usually requested if the business is young (not enough time in business). 
11. Your personal information– to verify your identity and evaluate your consumer credit.
12. Personal guarantee– an agreement that you’ll pay the bill even if your business folds. 

Different Credit Limits

Business credit cards usually have higher limits.

The credit limit on a credit card is the max amount you can charge to that card. 

Credit card companies assign credit limits based on your creditworthiness and annual income or debt to income ratio. 

For personal credit cards, the average American has three to four credit cards and a total credit limit of just over $30,000. This means the average credit card limit is around $10,000 or less. 

On the other hand, business credit cards often come with much higher credit limits. According to Experian, the average combined credit limit on business credit cards for small businesses is just over $56,000. 

Why? 

Income is one deciding factor. A business is likely to have a higher income than an individual does.

Expenses are also considered. Businesses have more considerable expenses and often purchase high-dollar equipment that they may utilize for several years. 

A business is also likely to have multiple employees as authorized users on their credit cards. A large company may not know what each employee is purchasing from day to day. So having a higher credit limit can prevent accidentally maxing out the credit card. 

Credit Impact

Business credit cards can affect both your personal and business credit scores. For more information about their differences, check out our Personal Credit vs. Business Credit: What to Know article.

While business credit cards are designed to build business credit, they can impact your personal credit score. 

Which credit bureaus a business credit card reports to varies by lender. 

Some business credit cards report only to your personal credit, while others report only to your business credit. And a select few report to both. Who your credit card companies report to matters, check out 5 Secured Business Credit Cards That Report to D&B for an extensive list.

Another way a business credit card can impact both your personal credit and your business credit score is when you fail to make on-time payments. 

If you have a business credit card that normally only reports to the business credit bureaus, leaving your balance unpaid could result in the delinquency being reported on your personal credit. This often only occurs when you are incredibly past due. 

Remember that personal guarantee we mentioned earlier? 

This comes into play when your business credit card becomes delinquent. The guarantee allows the credit card company to go after your personal assets and allows them to impact your personal credit negatively.

Consumer Protection Policies

There are no consumer protection policies on business credit cards.

Credit card companies have to follow the letter of the law regarding the cards they offer. There are several regulations and policies in place to prevent disreputable practices. 

The most well-known is the Truth in Lending Act (TILA), also referenced as Regulation Z, which is what implemented TILA. This