Key differences between a personal credit card and a business credit card

As a business owner, it may be tempting to use your personal credit card for business expenses. However, doing so could mean missing out on the benefits a business credit card offers.

In this guide, we’ll explore seven key differences between personal and business credit cards to help you choose the right card for the right situation.

Key differences of personal and business credit cards

This at-a-glance table summarises the main differences between these two types of product.

1. Higher and lower credit limits

Business credit cards usually offer higher credit limits than personal credit cards. 

Lenders determine the limit of a business credit card based on both your personal income and your business revenue. For a personal credit card, the lender only considers your personal income.

A higher credit limit provides your business with a larger buffer and more spending power. For example, if you're expanding your business and need more stock or raw materials, you may quickly max out a personal credit card, restricting your growth. Getting a business credit card with a higher spending limit, can better support your expansion, helping you scale more efficiently.

2. Build a business or personal credit score

Using a personal credit card responsibly by spending and repaying the balance on time can improve your personal credit score. Likewise, using a business credit card responsibly can help build a credit score for your business. 

In the early stages of running a business, it may be tempting to rely on personal credit because your business lacks a credit history. However, continuing to use a personal credit card prevents you from building a business credit profile. This can lead to several issues later on, including: 

• Difficulty accessing credit: Your business may struggle to secure other credit options, such as loans or invoice finance, limiting growth opportunities

• Higher interest rates: You may face higher interest rates, making borrowing more expensive for your business

• Limited supplier relationships: Suppliers may demand upfront payments or impose stricter terms, affecting cash flow and business operations

• Lower business credibility: A poor or non-existent credit score can damage your business's reputation, making it harder to gain trust from potential partners or clients

• Challenges in securing leases: Landlords may hesitate to rent commercial property or offer favourable terms if your business lacks a solid credit history

Building your business credit score through the responsible use of a business credit card can help avoid these challenges.

3. Rewards

Both personal and business credit cards offer rewards and perks, but the types of rewards differ.

A personal credit card typically rewards you for spending with points or vouchers that you can use for shopping, petrol or flights. While these perks can be useful in everyday life, their benefit to your business is limited.

In contrast, the rewards offered by a business credit card are more aligned with business needs. Depending on the card, you may receive discounts on business essentials such as office supplies or online advertising. Others offer discounts on car rentals and hotels, or provide access to airport lounges – perks that can be useful for business travel. Some business credit cards also offer cashback on spending, which can help improve cash flow. 

4. Separate finances and track expenses 

A personal credit card can help separate daily expenses, such as shopping or paying for a night out. However, it’s primarily designed for you – the cardholder – or your household, and as such, it lacks the facility to track spending more closely. 

The last thing you want at the end of the month – or worse, at the end of the financial year – is to sit down with a credit card statement and sort out which expenses are personal and which are business-related. 

Many business credit cards allow you to automatically categorise expenses and integrate accounting software that syncs with your business bank account. This provides better oversight of your business spending, helping you forecast and plan more effectively. And, of course, it helps when it’s time to file tax returns.

Keeping finances separate makes life easier all round, and if you run a limited company, it’s also a legal requirement. 

5. Interest rates and fees

Personal credit cards often offer deals, such as 0% balance transfers or interest-free spending. These offers can last for months or even years, but fees and interest rates can quickly add up once the introductory period expires. 

Interest-free deals and balance transfer offers are less common with business credit cards. And when you can find them, they usually don't last as long. 

Some business credit cards also charge an annual usage fee. These additional costs can add up, but the benefits, rewards and perks often offset the initial costs. However, it’s important to do your sums and assess the cost/benefit balance based on your cicumstances. 

6. Multiple cards for multiple users

Personal credit cards typically allow a limited number of additional cardholders, such as a family member or other trusted individual. This can help with household spending but has limited use beyond that.

With a business credit card, you can often issue multiple cards to employees, all linked to the same account. You can set different spending limits for each card, allowing you to track individual expenses. This offers several benefits. For instance, it:

• Cuts down on admin – Approving every employee expense request and reimbursing them each month can be time-consuming

• Reduces authorisation requests – Employees can make purchases when needed and without delay, saving you both time

• Empowers employees – They can handle necessary spending without regularly checking in with you

7. Protection

The Consumer Credit Act, specifically Section 75, protects purchases made with personal credit cards, allowing you to dispute transactions or request refunds if the seller breaches the contract or misrepresents the goods and services. This protection doesn’t extend to purchases made with business credit cards.

Both personal and business credit cards offer fraud protection, but you should check the terms of your specific card. For example, some business credit cards may require the business to assume more responsibility for fraudulent activity compared to personal credit cards.