From credit limits to rewards, here’s what sets business credit cards apart.

Business credit cards function similarly to personal credit cards, but differ in key areas such as credit limits, payment terms and other features. Here’s what business owners need to know.

Key factors that make business credit cards different

One of the most useful things about business credit cards is that they may have higher credit limits than personal cards. This is largely because card issuers look at annual business revenue rather than personal income when setting the limit. For a growing business, the difference between a $10,000 limit and a $75,000 limit can be a game-changer.

Traditional business credit cards offer revolving credit like personal cards, where the cardholder has an interest-free grace period between the transaction date and repayment date. The business makes a monthly payment ranging from the minimum amount due to the full balance. Any balance carried forward is charged interest. With careful planning and by paying off the balance in full, businesses can increase their interest-free float up to 54 days on some purchases.

When it comes to interest rates, business card rates are based on a spread over the Wall Street Journal Prime Rate. The business card rate will change with the Prime Rate changes. Holders of personal credit cards are protected by the Credit CARD Act of 2009, which requires lenders to provide consumers with at least 45 days’ notice before increasing the APR, as well as other protections.

Like personal cards, business cards offer rewards but they may focus more on business-specific benefits. For example, rewards may be enhanced for business-focused categories like office supplies or telecommunications. The rewards take many of the same forms as personal card rewards, including cash back, statement credits and points that can be used for specific purposes.

How credit reporting differs

It’s widely known that personal credit card limits and payment histories are reported to the major consumer bureaus—Experian, Equifax and TransUnion. Business credit cards work differently. Applying for one does require a personal guaranty, but that doesn’t mean your personal credit is on the line every month. Consumers doesn’t report business card activity to commercial credit bureaus such as Dun & Bradstreet. The only time your personal credit comes into play is during the initial underwriting process, when a credit pull is required. After that, the card won’t show up on your personal credit report.

How a business credit card helps protect your personal assets

An LLC or corporation business structure can help protect personal assets from creditors—provided you keep business finances, including credit card transactions, separate. A business credit card used only for business purposes helps keep the separation intact.

Commingling business and personal expenses can result in what courts have called “piercing the corporate veil.” If this happens, the business may not be treated as a separate entity and personal assets could be put at risk. Another benefit of separating business and personal is that it makes accounting a lot easier.

Other types of business credit cards

Some cards called business credit cards are actually charge cards that require full repayment each month; failure to pay the full balance may result in fees or other penalties.

There are also new fintech credit cards offered by non-bank organizations. Fintech credit cards may require daily or weekly repayment with funds automatically debited from the cardholder’s business checking account. Fintechs may not be regulated like banks and credit unions and could pose risks for consumers and businesses using their services.

Business Rewards credit cards at Consumers

Consumers business members have access to business credit cards with some of the best rewards around, including one point for every $1 spent, 1% cash back, no annual fees and more. Discover more about Business Rewards cards.

 

All loans subject to approval. Rates, terms, and conditions are subject to change may vary based on credit worthiness, qualifications, and collateral conditions.