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All about credit cards
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Corporate vs. personal credit card
Finding and utilizing the correct credit card may help you pay for everyday expenditures, collect rewards, and establish credit for your company. And if you're confused about the distinction between corporate credit cards and personal credit cards, you're not alone.
Although the two kinds of credit cards have some similarities, knowing the distinctions can help you determine whether a business credit card or personal credit card is best for your requirements. So, how do you tell the two apart? Let’s break down a detailed comparison of business credit cards vs. personal credit cards as a starting point for your business credit card search.
Business vs. Personal Credit Cards: What Are the Differences?
To begin with, both sorts of credit cards function in the same way. Issuers provide you with a credit line, allowing you to make purchases while still paying off your debt at the end of the month. Interest accrues on both corporate credit cards and personal credit cards in the same way—if you don't pay off your debt in full by the end of the month, you'll be charged interest on the outstanding balance.
Furthermore, depending on the card, you may be eligible for rewards, cash back, or other benefits when you use your credit card to make purchases. Despite these similarities, when it comes to corporate credit cards vs. personal credit cards, there are some major distinctions to be aware of.
An application for a corporate credit card will request details specific to your company
A significant distinction between business and personal credit cards is that a business credit card application will request information particular to the firm. Although most company credit cards may be applied swiftly and simply online, these applications will ask for information. Of course, since personal credit cards are intended for people, these fields will not appear on an individual credit card application. A corporate credit card application, on the other hand, will need you to provide some personal details. Most company credit cards will need a personal guarantee at this time.
Even though it's a company credit card, this guarantee, which may be found in the tiny print of your agreement, ultimately keeps you, the person, accountable for any debts you generate with the card. As a result, if your company is unable to pay the card's amount at any point, you, the individual, will be responsible for making the payments, just as you would with a personal credit card.
Your business credit card may be exempt from individual safeguards
One of the most technical distinctions between business credit cards and personal credit cards is that corporate credit cards aren't as strictly monitored and managed as personal credit cards. Furthermore, these safeguards may affect how your balance payments are applied. On a personal credit card, if you pay several interest rates on the same amount, the issuer is legally required to apply the payment to the higher rate first, which will reduce your interest payments. A business credit card is not always the same.
Your payment can be applied to the sum with the lowest interest rate, allowing the most costly element of your loan to accrue interest charges. However, most corporate credit card issuers provide the same consumer protection provisions to their business credit card customers as a courtesy, so this shouldn't be a major worry. It's vital to realize that issuers aren't obligated by the same individual protection regulations as consumers. As a result, before signing up for a credit card (corporate or personal), you should always read the terms and conditions carefully.
Higher credit limits are possible with business credit cards, but they come with higher interest rates and fees
For starters, since business credit card applications ask for both your company and personal income, you'll almost always be able to get a bigger credit limit with a business credit card than you can with a personal credit card. As you would imagine, corporations benefit the most from this since they often earn and spend more money than individuals.
However, when comparing personal and corporate credit cards, you'll see that business credit cards have higher APRs and fees. While some of these costs are linked to the degree of benefits you obtain with the card, this isn't always the case with interest rates. APRs on corporate credit cards are often higher than on personal credit cards. However, if you intend on carrying a loan from month to month, you simply need to be concerned about a higher APR. Furthermore, although some company credit cards have large annual fees, there are just as many low-cost business credit cards available.
Both your company and personal credit might be harmed by using a business credit card
As you are probably aware, your personal credit report is influenced by your borrowing habits with your personal credit card. Company credit cards, on the other hand, have the ability to damage both your business and personal credit reports, which is one of the most significant variances between business credit cards and personal credit cards.
To begin with, how much you spend on your business credit card has an impact on your credit score. In fact, appropriately utilizing a business credit card is a great strategy to establish business credit since your credit card provider will record your activity to the business credit agencies.
Can I Use a Personal Credit Card for Business?
Although there may not be any specific restrictions with regard to using personal credit cards for business purposes, it is still a good idea to refrain from doing so. This is because credit cards issued for personal use have a lower credit limit than business credit cards. So, you may end up using all your credit limit. Additionally, using a personal credit card for business purposes can also impact your credit score negatively if you are unable to repay the huge bills. A personal credit card will also not come with the many business-specific rewards and benefits that business credit cards offer. So, it is always a good idea to use only a business credit card for your business needs.
It's critical to grasp the distinctions between a business credit card and personal credit card while making a decision. After all, thoroughly comprehending these distinctions can aid you in determining what is greatest for your company and locating the best credit card to meet your specific requirements.
Although there are a few situations when using a personal credit card for business spending is acceptable, you should keep your business and personal money distinct by utilizing a business credit card for all transactions. Plus, you'll be strengthening your company's credit score as a result, which will surely help your company in the long term.
A quick recap
- Business and personal credit cards have many similarities.
- But an application for a corporate credit card will request details specific to your company.
- Your business credit card may also be exempt from individual safeguards.
- And higher credit limits are possible with business credit cards, but they come with higher interest rates and fees.
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