Business credit card vs personal credit card - Key differences
Credit cards have become an integral part of our lives. They let us make purchases without actually spending our money for a certain period before repaying the borrowed amount through credit cards. A major use of credit cards is for businesses that need to make daily operational expenses but might not have the liquid cash to do so.
In such a situation, many people use a credit card. This gives them enough time to gather money and make repayments on time. But before all of this, many people struggle to choose between a business credit card vs personal credit card. Both have their advantages and disadvantages but you should choose based on your requirements.
What is a business credit card?
A business credit card is a credit card specifically designed for businesses. These cards run on a revolving line of credit issued to your business by the card provider.
When talking about personal credit cards vs business credit cards, the cards for business often come with features that are tailored to business needs such as expense tracking, card controls, and higher credit limits.
Also, there are different types of business credit cards that are available and knowing the types of credit cards available will help you in selecting the right one that suits your requirement.
What is a personal credit card?
A personal credit card as the name suggests is issued to a single individual under their name. It can be used for various expenses like groceries, dining out, and entertainment expenses.
Personal credit cards come with benefits such as rewards programs, purchase protection, and cashback options.
While both business credit cards and personal credit cards tend to have benefits, personal cards have more discounts and reward programs that are related to daily household and entertainment-based expenses.
Business credit card vs personal credit card - What are the key differences?
1. Liability
With a personal credit card, the individual is personally liable for any debts incurred on the card. In contrast, with a business credit card, the liability falls on the business as a legal entity, not the individual. This factor is an important thing to remember when you’re choosing between a business credit card vs a personal card.
2. Credit reporting
Business credit cards are not typically reported on the individual's personal credit report, while personal credit cards are.
So if you use a personal credit card for business expenses and make a late payment, you'll end up negatively affecting your personal credit score. This is just one of the many reasons you should not use a personal credit card for business expenses.
3. Reward categories
Business credit cards vs personal credit cards often come with different categories under which they provide you rewards.
Business cards are more tailored to business expenses such as office supplies, travel expenses, and telecommunications.
Personal credit cards may offer rewards categories such as dining, entertainment, and grocery purchases.
4. Credit limit
Business credit cards typically come with higher credit limits than personal credit cards. This is because businesses often have larger expenses than individuals.
But it is also harder to obtain these higher credit limit business cards because you must have a good credit history or show the financial stability of your business to get these cards.
5. Reporting and statement
Business credit cards often provide detailed reporting and statements that help businesses track expenses and reconcile accounts, whereas personal credit cards may not provide as much detailed information.
You would have to shift to a modern credit card provider as compared to traditional banks to get most of the new-age tech that allows you to track, monitor, and view your statements in real-time.
6. Interest rates and fees
Both business credit cards and personal credit cards will have interest rates and fees applicable to them. The rates and fees may be higher in a business credit as lending money to a business is usually at a higher quantity and considered riskier.
A higher amount of credit may come at a higher interest rate or fees for acquiring the card. You should always check your personal or business expense needs before choosing a card.
7. Eligibility criteria
While credit history and creditworthiness are checked in both cases, the criteria for getting a business credit card are usually more stringent than those for a personal credit card.
This is because businesses are evaluated based on their creditworthiness and financial stability whereas you might get a personal credit card with a low credit amount even if you don't have a major credit history.
Volopay cards to help streamline your expense reporting process
Why should businesses use a business credit card over a personal card?
1. Helps separate business and personal expenses
If you're a business owner who uses their personal credit card for their business expenses, then you inevitably will face some problems. These can be issues such as business and personal expenses getting mixed up and a higher tax liability falling on your head because all income and expenses are under your name.
Using a business credit card for business expenses helps to keep business and personal expenses separate, making it easier to track expenses and manage finances.
2. No personal liability
Business credit cards vs personal credit cards have a different liability structure for repayment.
Using a business credit card means that the business is liable for any debts incurred, not the individual. This protects the individual's personal assets from being seized in the event of business debt or bankruptcy.
3. Real-time visibility for finance teams
Business credit cards often come with detailed reporting and analytics, which provides real-time visibility for finance teams. This helps them to track expenses, monitor employee spending, and make better financial decisions.
4. Reduced expense fraud
Business credit cards vs personal cards often come with card controls and spending limits, which help to prevent expense fraud and abuse.
5. Improves the credit score of the business
Using a business credit card responsibly by paying all the dues on time without any delay will improve the credit score of your business. This makes it easier to obtain financing and larger amounts of credit such as loans in the future.
Our article on 6 best business credit cards can help you in selecting the right business credit provider that suits your business requirements.
Conclusion
The answer to if you should choose a business credit card vs a personal credit card for your company should always be a business card. Now whether you have a small or large business, ensuring you have the right type of card(s) to manage all your transactions is essential to getting the most from your budget.
Volopay corporate cards for businesses let you transact domestically and internationally with an ease.
The best part is that you can issue a physical corporate card from Volopay for each employee of yours that needs it. This is extremely helpful for traveling sales professionals and any other executive member that needs the company’s budget at their disposal without too many barriers.
To safeguard your organization’s money from being overspent, these cards also come with custom spending limit controls that you can set through our platform for each card. This ensures that there is no leakage of money and all expenses are within the planned budget.