Differences between A Business and Personal Credit Card
Business Credit Cards

6 Differences Between a Business and Personal Credit Card

So, you’re ready to take the next step in your business’ growth. Deciding whether to make this investment using personal credit can be tricky. Do you stick with the personal credit card you already have, or is it time to switch over using a business credit card for all the expenses? Here, we’ve made a list of the difference between these two options so you can see for yourself which is the best option for you and your business. Let’s start with the obvious.

1. Business credit cards are built for business use!

There are a range of services that come with using a business credit card that you won’t typically have access to with a personal card. These can be in the form of account management services to support your business with any queries, disputes or conflict resolution, saving you hours if something goes wrong. They could be in the varied rewards programs offered or in the greater legal protections offered through insurance and liability structures. This level of support isn’t always available when using personal credit cards for business expenses.

On top of all this, business credit cards offer additional features you won’t find on a personal credit card. Expense management tools, company spending insights and integration with your accounting software are some of the more common features designed to help you run your business. Another big advantage is having access to higher spending limits than are offered on personal credit cards.

2. Business credit cards usually have a higher credit limits than a personal card

As we have highlighted, you can significantly improve your cash flow by applying for business credit. Personal credit cards offer on average five times less than what can be accessed through a business credit facility. This is due to the higher volume of transactions and liquidity businesses often have. Keep in mind that applications aren’t instantly approved; your business will have to apply and provide proof of revenue to get approved.

But, once accessed, there are innumerable benefits to increasing your overall credit limit. This could mean extra security when a surprise bill appears, giving you the confidence to meet any obligation. It could just mean you don’t have to scrimp and save when it comes to growing your business — you can ramp up that marketing budget or take advantage of an opportunity when it presents itself. A business is often measured by cash flow — applying for a business credit card is a great way to demonstrate the financial viability of your growing business.

3. Business credit cards are used for business expenses only, but personal cards can be used at any time

Isolating your business spending from your personal spending has countless benefits. When tax time rolls around, having your personal and business credit separate will make it easier for you or your accountant to complete your tax claim and find potential deductions. Plus, being able to quickly access an itemised list of business costs helps you stay on top of budgets, control money going out of the business and provides greater oversight for how you can improve. In addition, relying on personal credit can become an issue if you have multiple employees. This could mean disputed reimbursements or, in the worst case, fraudulent transactions.

Most modern business credit cards come with transaction notifications so you can keep an eye on multiple employees spending in real-time. This means the process of repaying employees or separating personal and business spending is greatly simplified. Piece of mind is at a premium when running a small business; using a business credit card clears the way for simple employee spending and accurate tax reporting.

4. The interest rates on business credit cards are typically higher than on personal cards, and the length of the repayment period differs

It’s important to understand the terms and conditions when exploring your options. For example, business credit cards often require you to repay the balance in full at the end of each month, whereas personal cards allow you to carry a balance. Of course, there are business credit cards that allow you to carry a balance, but the interest rates (and annual fees) are often higher. So it's important to know what you intend to use the card for and seek out the appropriate form of finance. Typically, for larger purchases that you need to repay over a longer period of time, credit cards are a no go altogether.

If you are a sole-trader without the need for access to a large amount of credit then it might be best to take advantage of the introductory offers made on personal cards. However, it will not be long before your business is in the position to require greater amounts of credit for growth, so don't wait too long before looking into business credit cards.

5. Business credit cards can get big rebates and low-interest rates from merchants who offer cash-back/coupon cards

You are more likely to see a reward through the use of business credit cards. To the person or business receiving payment, a business credit card means potentially repeating or high paying customers. As a result, they are more willing to offer a variety of incentives for you to give them your business. This could be a simple cashback scheme, discounts on bills or future purchases, and you could even be offered coupons cards for additional purchases. Having a business credit card will give you all these benefits when building relationships with your suppliers. When compared to the 0% interest schemes sometimes offered to personal credit cardholders, these rebates and low-interest rates make a business credit card the more financially responsible decision.

6. Business credit cards can usually be used anywhere like personal cards, but there are sometimes restrictions as to how they can be used

When considering whether to apply for business credit, keep in mind that it does not replace your personal credit cards. While you can use business credit for personal expenses, it makes things complicated on a number of fronts. First are the complexities at tax time, which have already been discussed. The other issue is whether using the business card for personal use will affect any of the protections offered by the business. For example, fraudulent uses are protected under company liability insurance, not individual. All of this is to say your business credit card will help grow and strengthen your business; it won't replace your personal credit card.

In summary, a business credit card, especially when you are still a small business, can function very similarly to your personal card — covering day-to-day expenses and bills. However, some key features such as tax reports, cards for employees, and higher credit limits are lost if you solely use personal credit. Managing finances will be infinitely more manageable if you have your personal and business expenses separated as your business grows.

So, is choosing an Archa credit card right for you? Would your business benefit from a higher credit limit, longer terms on repayment and liability protection? If so, don’t waste any time in applying for Archa today. After our quick onboarding process, you will have access to all these benefits and can’t start growing your business today.