There are a lot of misconceptions out there about the differences between business credit cards and personal credit cards. How different are they? Who can apply for a business card? And what are the pros and cons of each?
In this post, we'll highlight the main differences between personal and business credit cards and show you how you can benefit from — and maximize — both card types.
Business vs. personal cards: Target audience
The first key difference is that business credit cards (naturally) are designed for business use. Meanwhile, personal credit cards can be used by anyone.
You may assume that you don't qualify for a business card. However, even if you don't have a formal business with a tax ID number, you can still open a business credit card.
Do you regularly sell products on eBay or Amazon? Are you a freelancer, or do you work as an independent contractor? In any of these cases, you might prefer to separate your business expenses from other purchases.
Even without an employer identification number, you can apply for a business credit card as a sole proprietor and use your Social Security number. Card issuers such as Chase even encourage you to do so with some cards.
Just remember that any card issuer can ask for additional information about your business. Citi, in particular, tends to place increased scrutiny on its business card applications.
Don't sweat it, though; if you have a good reason for applying, you shouldn't encounter any extra difficulty getting approved.
Related: How to choose the right credit card for your business expenses
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Business vs. personal cards: Applications and welcome bonuses
As a general rule, you usually can't receive a welcome bonus from the same card more than once in your lifetime. If you get a welcome offer for The Platinum Card® from American Express, for example, you almost definitely won't be able to get it again down the line.
However, business cards are treated as separate products in the same card family, so you can earn a welcome bonus on both the personal and business versions of a card — the Amex Platinum and The Business Platinum Card® from American Express, for example.
There are also differing rules when it comes to application windows. The general rule of thumb with Citi applications, for example, is that you must wait at least eight days between applications for personal cards, and you can't apply for more than two cards in a 65-day period.
However, business cards follow different rules, so you can only apply for one Citi business card every 95 days.
These differences are important to keep in mind when applying, especially since you'll want to maximize the one welcome bonus you do get on a given card. If you already have the personal version of a card, though, fear not — you'll still be able to land the business version, along with its welcome offer.
Related: Here are the best credit card welcome offers
Business vs. personal cards: Effect on credit score
A business card application will count as a hard inquiry on your personal credit report, but the card activity shouldn't show up on the same report.
This is important because if you're starting a business and run up a large balance on the card, it means that it won't lower your overall credit score by raising your credit utilization (a key factor used to determine your FICO score).
That said, if you default on a business card, an issuer can come after you. Therefore, you'll want to keep up with payments on a business card just as you would a personal card and avoid taking on too much debt.
Related: Credit card debt hits new record of over $1 trillion — here's how to consolidate and pay off your debt
Business vs. personal cards: Benefits and earnings rates
One of the easiest ways to maximize your points and miles is by using credit card category bonuses. Business credit cards tend to have different categories than their personal counterparts.
These earnings rates are typically more geared to, as you might guess, business expenditures — bonus earnings on office supplies, shipping and transit, unusually large purchases and more.
There are even specialized business cards that can earn rewards on purchases made on a particular product or service.
In addition to different bonus categories, business cards offer unique perks that apply to businesses but may also be valuable to individuals. For example, the Amex Business Platinum offers annual credits with Dell and Adobe, which are useful if you spend a lot of time at a computer screen either for business or pleasure. Enrollment required for select benefits.
Business credit cards typically are not monitored and regulated as closely as personal credit cards. As a result, issuers provide fewer protections and can charge higher interest rates than for comparable personal products.
These companies can change your annual percentage rate or tack on additional fees and penalties without warning.
If you follow TPG's 10 commandments for travel rewards credit cards and never carry a balance on your card, the relative lack of protections shouldn't be much of a concern. Still, it's something to keep in mind.
Related: How many business credit cards should you have?
Bottom line
Business credit cards can help various businesses — large and small — maximize purchases by offering bonus points and miles in relevant categories. You can also access additional perks and welcome bonuses, helping to pad your loyalty accounts.
Is it time to add a business credit card to your wallet? If so, check out our list of the best business credit cards available right now.
Editorial disclaimer: Opinions expressed here are the author’s alone, not those of any bank, credit card issuer, airline or hotel chain, and have not been reviewed, approved or otherwise endorsed by any of these entities.
