How a business credit card differs from personal

In August 11, 2016

Business Credit Card
Lots of advantages come with having a credit card for business:

  • it’s a low hassle way to make small purchases,
  • it’s easy to manage with predictable payments, and
  • it helps separate business transactions from personal ones.

But does it truly matter if someone has a business credit card, versus using personal credit cards they may already have available? It might.

Business Credit History

As a business grows, most entrepreneurs are likely to need some kind of business loan to support that growth and, depending on the amount and type of loan, having a solid personal credit history isn’t always enough to secure approval.

Having some kind of business credit history is important, too.

It demonstrates a business’ creditworthiness and stability to a lender. When combined with the business owner(s) personal credit history, they have a solid indication of likely a loan is to be repaid.

A business credit history can also open the door to greater amounts of capital and lower interest rates than a personal debt-to-income ratio might accommodate.

Opening up a business credit card and using it responsibly will establish a foundation of business credit that is necessary for seeking those larger business loans.

Employee Spending Limits

Personal credit cards have a set spending limit that is easily managed between just one or two card users… but what about a business that might need to provide credit cards to five, six or even a dozen employees?

It becomes much harder to anticipate their spending habits, and the impact each has on the credit card spending limit.

Plus, sharing a personal credit card allows employees to impact the personal credit of the cardholder, with all the risks that might entail.

In contrast, a business credit card manages credit with preset individual spending limits. Because each card has its own limit, total spending remains under control no matter how many employee cards are issued.

Business credit cards average a slightly lower annual percentage rate, too, when compared to personal cards.

Simplified Paperwork

Accounting can be a beast, and multiple users of a personal credit card can result in a major paperwork hassle.

A business credit card provides detailed records of spending and expense tracking features that are important, along with annual spending reports. Plus, the data is typically able to be imported into common accounting software systems.

It also makes quick work of doing taxes. Not only does it effortlessly keep business expenses separate from personal, it helps an entrepreneur establish that their business is not a hobby… an important distinction to the IRS.

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Read the fine print carefully

Before you take the leap to apply for a business card, there’s one last difference between a business credit card versus personal that is important to know: a business card doesn’t have the same protections that apply to consumers.

According to, the Truth in Lending Act and the Credit Card Accountability and Disclosure Act don’t apply. Therefore, it’s important to keep a close eye on terms of your card and any agreements you sign.

Also, some small business cards require a personal guarantee, meaning the lender can still hold the business owner personally responsible for the business credit card debt.

Is a business line of credit more appropriate for a purchase need than a credit card? Take a look at this previous post on purchasing equipment for some quick help with that decision.

Want more information about small business credit cards? Visit a Horizon Community Bank branch today, or call to make an appointment and speak to our representatives. We’re happy to help!

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