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Sunday, April 12, 2020

Main differences between business cards and personal cards

Business credit cards usually have higher spending limits and rewards, but less protection

Summary
Regardless of whether you are a small business owner or just a side appearance, business credit cards can give you more purchasing power and rewards that are consistent with your spending - but they can also have potential drawbacks. The following should be noted before you apply for a business card

Business credit cards and personal credit cards can make it easier to top up purchases and collect rewards.

On the surface, they seem the same, but there are actually several things that separate business cards from personal cards. If you are interested in a business credit card, these tips can help you understand the differences between the two.



Business credit cards are designed for business use

A business credit card is said to be a tool to make purchases for your company. Personal credit cards, on the other hand, can be used by anyone.

Opening a business credit card requires that you have a business or plan to open one. The good news is that credit card companies can offer some flexibility in what makes a company.

For example, you do not have to have a Federal Employer Identification Number (EIN) or be registered to be eligible for a business card. It is possible to get a business credit card even if you only have a side job or work as an independent contractor.
One thing you may be wondering is whether you can use a business credit card for personal spending. You can, says Brian DeChesare, founder of the financial blog Mergers & Inquisitions, but you shouldn't.

“When preparing your taxes, you have to analyze the transactions one year at a time,” says DeChesare.

Not only is this time consuming, it can also make reporting on deductible expenses difficult. And if you claim personal expenses as a business deduction, you could accidentally get into hot water with the IRS.

If you're considering merging business and personal expenses on the same card, make sure you have a good accounting system, says Spencer Reese, owner and editor-in-chief of Military Money Manual.

Business credit cards can also be helpful in building and building business credit. While you can apply for a business card using your social security number, your account history can be reported to the business credit bureaus. This can be critical to developing a good business credit score.

One thing you may be wondering is whether you can use a business credit card for personal spending. You can - but you shouldn't.



Rewards and bonuses are based on your spending
Business and personal credit cards can offer rewards and introductory bonuses, although they're not always the same.


For example, the Chase Ink Business Cash Card gives businesses 5% cashback on the first $ 25,000 a year from combined purchases of office supplies and internet, cable and phone services.
The Chase Freedom Card, a personal card, offers 5% cashback on the first $ 1,500 per quarter in various bonus categories after activation, which in the past included department stores, grocery stores, and gasoline.
This is another reason why it makes sense to keep business and personal expenses separate. The best way to maximize your premium income is to align your spending with your card and related reward categories.

When it comes to welcome bonuses, they can sometimes be more generous for business cards, says Reese. But think about what you have to spend to qualify.

For example, Capital One Spark Miles for business cards and Capital One Venture Rewards credit cards offer an introductory bonus of 50,000 miles if you reach a certain spending threshold within the first three months. However, to qualify for the Spark Miles card bonus, you will need to spend $ 4,500 against the $ 3,000 required for the Venture Rewards card.

Interest rates and fees are not the same
Both personal and business credit cards can charge interest and fees. The difference is that some business credit cards incur higher annual costs.

Jeff Rose, a certified financial planner and founder of Good Financial Cents, says that many business credit cards waive the annual fee in the first year, but it shouldn't be overlooked when choosing a card.

"After all, you have to pay for what you should think about if you don't do a lot of shopping," he says.

The card's APR is another consideration. If you believe that you have a balance at any time, the interest expense can increase your business debt.

"When you pay interest on purchases, your reward card isn't very rewarding," says Rose.

A business card is an alternative if you want to avoid interest charges. Since you have to pay the full amount for these cards every month, you do not pay any interest on your fees. The trick is to make sure that you only calculate what you can afford to pay off at the end of the month.

Business and private cards offer different advantages
Similar to rewards and welcome bonuses, business credit cards can vary in terms of benefits and benefits. Here, too, the focus is on providing advantages and functions that are valuable for companies compared to everyday donors.

Personal cards often give you benefits such as purchase protection, travel insurance and fraud protection without liability, says Reese. Business credit cards usually emphasize other benefits, such as: B. Cost management controls or discount programs that can save you business money.

Personal and business credit cards have one thing in common in terms of benefits: the higher the annual fee for the card, the better.

Take American Express Platinum Card® and American Express Business Platinum Card®, which incur annual fees of $ 550 and $ 595, respectively.

Both cards offer an annual fee of $ 200 for the airline, access to the airport lounge, and credit for TSA Precheck or Global Entry.

The Business Platinum card also includes a concierge service, access to the Global Dining Collection, and a 35% bonus when redeeming points for flights through the Membership Rewards program.

Business cards may offer more purchasing power
When you open a new business or personal credit card, your first question may be how much credit you are approved for.

According to DeChesare, the limits for business credit cards are usually much higher than for private cards for a reason. "This gives the company access to emergency funding."

Higher limits for a business credit card make sense, since on average companies charge more each month than the normal person. Individual credit limits for business or personal cards usually depend on your credit rating and financial profile.
For example, if you have a brand new company, it is likely that you will have a lower credit limit to start with. Overall, however, you may have more space for a business credit card than for a personal card.

There are some personal and business charge cards for which there is no preset spending limit. This means that instead of a fixed credit limit, the amount you can calculate each month can fluctuate depending on your account activity and credit history.

This is handy, but again, how you use your purchasing power with a credit card is important.

"The disadvantages of a personal credit card are similar to those of a business card," says Rose. "If you don't have a habit of paying back your credit every month, it can easily get out of control."

The disadvantages of a personal credit card are similar to those of a business card. If you don't make it a habit to repay your credit every month, it can easily get out of control.

Card protection is not the same
One last thing you should know about business and personal credit cards is how you are (and not) protected with your expenses.

"Business credit cards have higher limits, but also higher fees and less protection," says DeChesare. “For example, a business card issuer can raise your APR out of the blue. This is not allowed with a personal credit card. "

Some business credit card issuers have chosen to extend the consumer benefits set out in the CARD Act 2009 to business cards, but not all. For this reason, it is important to carefully consider the safeguards, features, and benefits of a business credit card before applying.


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