What’s the difference between a personal credit card and business credit card?

You’ve got a personal credit card in your wallet. It’s been reliable, helping you manage expenses and maybe even earn some rewards. But as your company grows, you might wonder if it’s time for a change. Here’s where a business credit card might come into play. It’s more than a supercharged personal card. Business credit cards are built differently, with features that could give your business an edge. Let’s compare the two and see what sets them apart.

Spending power

Business credit cards often come with higher credit limits than personal cards. This makes sense when you think about it, as businesses often need to make larger purchases than individuals. Whether you’re buying stock in bulk, investing in new equipment or covering travel expenses for your team, a higher limit gives you more flexibility.

Take a founder of a tech startup using a personal card to pay for necessary subscriptions. As the business scales, they are likely to reach their credit limit more regularly, hampering growth. Switching to a business card with a higher limit, however, allows for bigger infrastructure investments and more room to grow. It can offer extra breathing room during a time of expansion.

Rewards and perks

Both personal and business cards offer rewards, but they’re tailored to different needs. Personal cards might give you points for food shopping or petrol. Business cards, on the other hand, often offer higher rewards for typical business expenses.

For example, the Funding Circle Cashback card offers 2% cashback on all business spending for the first six months, up to £2,000, then 1% uncapped. That’s money back in your pocket for the things you’re buying anyway for your business. 

Expense tracking

One of the biggest headaches for small business owners is keeping track of expenses. This is where business credit cards really shine. Most come with options to help you categorise spending, generate expense reports and even integrate with accounting software.

It makes things like tax season more manageable. With a business card, expenses are typically categorised automatically. Not only does this save countless hours figuring out what’s what, but it can lead to a better understanding of your expenses.  

Building business credit

Using a business credit card helps build your business credit score. This is separate from your personal credit score and can be relevant when you’re looking to get a loan, lease office space or negotiate with suppliers.

Many startups begin with personal savings and credit cards. But this approach can lead to roadblocks when it’s time to expand. Banks and lenders often want to see a business credit history before approving loans or lines of credit. Without one, you might find yourself in a tough spot. Using a business credit card can put your company in a much stronger position when it’s time to scale up or seek additional funding.

Liability

With a personal credit card, you’re personally on the hook for any debt. Business credit cards can offer some separation between your personal and business finances. Some even come with no personal guarantee for limited companies or LLPs.

This separation can be important if your business finds itself in hard times. It may also be easier to bring on partners or investors, as your business finances are clearly separate from your personal ones.

Employee cards

If you have employees who need to make purchases for the business, you may be able to get additional cards on your business credit card account. As a result, you can set individual spending limits and track expenses for each employee.

It’s a feature that can be invaluable for growing businesses. Instead of approving every small purchase, team members can have their own cards with preset limits. It frees up management time and empowers employees to make necessary purchases without constant oversight.

Interest rates and fees

Business credit cards often have different fee structures than personal cards. They might have higher interest rates, but also longer interest-free periods. For example, the Cashback card offers up to 42 days interest free credit and no annual fees.

Some business cards also come with higher annual fees, but these are often offset by the rewards and perks they offer. It’s worth doing the maths to see if the benefits outweigh the costs for your specific situation.

Protection

Both personal and business credit cards offer protection against fraud, but they differ in some key aspects. Personal cards often have stronger consumer protections under Section 75 of the Consumer Credit Act , including longer periods to dispute charges and more comprehensive liability coverage for unauthorised transactions.

So, which should you choose?

Business credit cards and personal credit cards work differently, with each designed for their specific purpose. Business credit cards incorporate features built around common business needs and spending patterns. From higher limits and tailored rewards to better expense tracking and the opportunity to build business credit, they’re designed specifically for your needs as a business owner.

If you’re considering a business credit card, why not check out the Funding Circle Cashback card? With market-leading cashback rates, up to 42 days interest free credit, and no monthly fees, it’s designed to work as hard as you do. 

Learn more about the Funding Circle Cashback card

07/11/24: While we want to help as much as we can, the information found here is provided solely for informational purposes and should not be considered financial or legal advice. To the extent permitted by law, Funding Circle does not accept any liability for any loss or damage which may arise directly or indirectly from the use of, or reliance on, the information contained here. If you have any questions, please speak to your professional adviser or seek independent legal advice.