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Almost everyone is aware of personal credit cards and their use. These cards issued by different financial institutions allow you to make purchases for which you can pay later. Business Credit Cards also work on a similar concept, provided that you are using them for your business-related spends, not for your personal expenses. Most of the major card issuers, such as the HDFC Bank, issue different personal and corporate/business credit cards. Now, you might be wondering the difference between the two cards. Can’t you use personal credit cards for business expenses? Yes, you can. But, using business credit cards can benefit you and your organization in many ways. Also, other than different names, there are a lot of differences between personal and business credit cards. Go through the complete article to understand the same:
What Are Business Credit Cards?
Business Credit Cards are the cards that are supposed to be used for corporate use instead for an individual’s personal use. Many credit card issuers offer business credit cards, and the application process is also very similar to that of standard/personal credit cards. However, you will have to provide the card issuer with your business details rather than all your personal information. You should use a corporate credit card if you are running a business for many reasons. It helps you keep your personal and business expenses separate and hence you can keep track of your business spending. And if you use the same card for your personal and corporate expenses, you won’t be able to find out how much you are spending on your purchases and your company.
Difference Between Personal & Business Credit Cards
Credit Limit
The credit limit of a business credit card is generally higher than that of a personal credit card. It is because the business expenses can be much higher than someone’s personal expenses. However, the credit limit on a business credit card depends on a few factors, including the total revenue that is being generated from the business, credit score, and income of the business owner. A higher credit limit on business credit cards can be helpful for your organization in many ways. There might be situations when you need to make some big purchases urgently for your company and your business credit card would seem to be a blessing to you at such times.
Rewards & Benefits
Business credit cards offer exciting benefits and perks like personal credit cards. But, these benefits will be mostly targeted at corporate-related spends like telephonic/utility bills, unlike the personal credit cards that offer you rewards/cashback on grocery purchases, shopping, etc. For example, the Business Regalia Credit Card offers a 5% cashback on utility, telecom, tax payments, etc, but a personal credit card hardly earns you cashback on such categories. With a business credit card, such benefits will save you a lot on your corporate spending. Other than this, your card issuer may provide you with exclusive travel benefits, keeping your business-related travel requirements in mind.
Impact on Your Credit Score
Using a business credit card may or may not affect the credit score of the owner depending on their credit card issuer. Some card issuers provide your account information to both consumer and commercial credit bureaus, whereas others only give it to commercial bureaus. So, usage of your business credit card may sometimes affect your credit score. However, the reverse is never true, i.e., the usage of your personal credit card will never affect your business credit score.
Fees & Charges
As business credit cards come with a higher credit limit, these can have higher fees and charges as well. Some card issuers offer business credit cards with very high annual fees compared to personal credit cards, but others may issue both on a similar fee. For example, the HDFC Business Regalia Gold Credit Card comes with the same annual fee as the HDFC Business Regalia Credit Card, which is Rs. 2,500.
Bottom Line
Now, you might have understood all the basic differences between personal and business credit cards. There are a lot of business owners who prefer using their personal credit cards for business expenses, but it is highly advisable for them to get a business credit card as it can be advantageous for them and their organization in many ways. As discussed above, business credit cards come with a relatively higher credit limit and hence you can make large purchases without worrying much about a negative impact on your credit score due to the high credit utilization ratio. Moreover, you can earn reward points/cashback on your business-related spends that you will not earn while using a personal credit card.
If you still have any doubts or queries regarding how business credit cards are different from personal credit cards, feel free to ask us in the comment section below!
