Credit cards are helpful for both personal consumers and small business owners. You have the option to use either a personal credit card or a small business credit card. However, there are benefits and drawbacks to each option. Here are the differences between personal and small business credit cards.

What’s the difference between personal and small business credit cards?

There are a few differences between personal and small business credit cards, which may be enough for you to determine which option is the better fit for you. You’ll find the following aspects often differ between small business and personal credit cards. 

  • Accepted use 
  • Consumer protection 
  • Credit evaluation 
  • Credit reporting
  • ID needed to apply
  • Perks and rewards

How are personal credit and business credit cards different?

For personal credit cards and business credit cards, there are four important differences for small business debit card users: 

1. Different Interest Rates and Fees

According to Wallethub, the average APRs for personal credit cards vary across credit scores as follows: 

  • Excellent Credit: 13.13%
  • Good Credit: 19.41%
  • Fair Credit: 22.58%

Meanwhile, the average interest rate for a business credit card clocked in at 16.9%. 

However, business credit cards often offer introductory 0% APR (Annual Percentage Rate or interest rate) for nine months to a year. This usually only applies to purchases—not balance transfers. Business cards that offer an introductory 0% APR often charge hefty balance transfer fees, which can add up.

Like business credit cards, some personal credit cards also offer introductory 0% APR terms. Unlike small business credit cards, the introductory APR period can last at least one year and sometimes longer. 

2. Different Perks

Personal credit cards and business credit cards also differ in the perks that each offers. While both types of cards offer perks, there are differences in how you can redeem them and the types of rewards the user can earn. 

Business credit cards typically offer rewards for business-related activities, which include:  

  • Business entertainment
  • Inventory
  • Services
  • Supplies
  • Travel

These cardholders can earn airline miles, cashback, and points for their business purchases. If you’re a business credit cardholder, you can earn rewards for spending on advertising or shipping purchases.

Personal credit cards offer perks, but your personal purchases will earn you the rewards, unlike business credit cards. You can earn rewards based on your spending in categories such as:

  • Drugstores 
  • Gas
  • Groceries
  • Other consumer spending purchases, such as entertainment or travel

Personal credit cards may offer rewards such as airline miles, cashback, and points. 

3. Spending Power Varies

Third, credit limit differences between the two cards can affect how much you’ll spend. If you use a small business credit card, you’ll have a higher credit limit because the spending power is based on business revenue and personal income. 

Whether you have a personal credit card or small business debit card, there are additional factors that will determine your credit limit and spending power, including your:

  • Co-applicant income and credit information (if applicable)
  • Credit history
  • Debt-to-income ratio
  • Income
  • Limits on other credit cards

4. Card Protection

The final difference between business credit cards and personal credit cards is card protection. Personal credit card holders have consumer protection laws. For example, the Credit Card Accountability Responsibility and Disclosure Act of 2009, also known as the Card Act, prohibits credit card companies from unexpectedly raising interest rates and charging excessive fees. Lenders also have a requirement to educate personal credit card borrowers about the cost of their debts and the terms of their debts. 

On the other hand, business credit cardholders don’t enjoy protection under the CARD Act. 

Can you use a personal credit card for business purposes?

Many new small business owners wonder if they can use a personal credit card for business purposes. Perhaps they’re still in startup mode or haven’t yet been approved for a business credit card. They can use a personal credit card for business purposes. Sometimes, it can even be beneficial to use a personal credit card for business purposes.

There are two reasons you’ll want to consider using a personal credit card for business purposes. The protections the CARD Act provides are exclusive to consumer credit cards so that business credit cardholders won’t enjoy this benefit.

Second, personal credit cards may have more options when it comes to rewards. Business credit cards offer business-oriented benefits, such as rewards for office supplies. This may not be a good fit for your business, so using a personal credit card can be a better option for you. Personal credit cards can allow you to redeem rewards for perks that you may find better related to your business needs. 

There are two potential drawbacks to using a personal credit card for business purposes. You may have difficulties differentiating personal purchases from business-related purchases during tax season. Using your personal credit card this way may also cause you to lose out on tax deductions you could’ve received for annual fees and interest payments.

Can you use a business credit card for personal use?

You may also want to know if you can use a business credit card for personal use. You can.  However, it isn’t as easy as using personal credit cards for business use.

Potential difficulties, or even penalties, can arise if you use your business credit card for personal use. Business credit cards have terms of service that may not allow you to use your small business credit card for personal use. As a result, you may violate your terms of service if you use your card in this way. 

Another difficulty you may encounter using your small business credit card for personal use can occur during tax season. If you’ve used your business credit card for both business and personal purchases, it may take a longer time to sort out the two purchase types.

Finally, you may face another issue with using business credit cards for personal use with liability issues. Making personal purchases on your small business credit card can create difficulties if your small business has personal asset protection—this protection may not extend to personal purchases. 

We Can Help You Manage Your Small Business Finances

As a small business owner, you have options for your small business credit card. Knowing the differences between the two cards and the benefits that each credit card offers can help you decide which card makes more sense for your situation. 

When you want help with your small business credit card and small business finances, make sure you work with the pros. Work with the professionals at 1-800Accountant to manage your small business finances!

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Written by Vincente Gomez

Vicente Gomez is a tax accountant for 1-800Accountant. He studied at Averett University where he received a double degree in accounting and ...