Key Differences Between Business and Personal Credit Cards
Update: Some offers mentioned below are no longer available. View the current offers here.
Credit card welcome bonuses are an easy way to boost your loyalty accounts, and the potential to earn rewards is even higher if you own a small business. Today, TPG Senior Points & Miles Correspondent Nick Ewen explains why business credit cards should be a part of your points and miles strategy.
We often discuss business credit card rewards here at The Points Guy. Whether it’s an overview of the top business card offers, a breakdown of options from one card issuer or a reminder of how to maximize a particular card, you’ll find a lot of information on the site. However, there are still a lot of misconceptions about these offerings, so in this post, I'll highlight the primary differences between personal and business credit cards to help you learn to maximize both.
1. Business cards are designed for businesses (but that shouldn’t stop you from applying).
The first key difference is that business credit cards (naturally) are designed for business use, while personal credit cards can be used by anyone. However, even if you don't have a formal business with a tax ID number, you can still open a business credit card. Maybe you regularly sell items on Ebay or Amazon; maybe you take on freelance assignments or work as an independent contractor. In any of these cases, you might prefer to separate your business expenses from other purchases.
For example, both my wife and I have an Ink Plus Business Card, yet neither one of us owns a business with a tax identification number. If you don’t have an EIN, you can simply apply as a sole proprietorship and use your Social Security number — Chase even prompts you to do so. We were both approved for this card without any fuss.
However, keep in mind that any card issuer can ask for additional information about your business; Citi in particular tends to put the greatest scrutiny on these applications. Don't sweat it, though; if you have a good reason for applying, you shouldn't encounter any extra difficulty getting approved.
2. Business and personal cards are considered different products.
This is important to keep in mind when it comes to welcome bonuses and application restrictions, especially with some card issuers tightening up how bonuses are awarded. For example, the application page for most American Express cards includes the following language:
“This offer is not available to applicants who have or have had this product.”
As a result, you generally can no longer receive a welcome bonus for an American Express card more than once. However, business credit cards are treated as unique products, so you can earn a welcome bonus on both the personal and business versions of a card. For example, if you're approved for the Starwood Preferred Guest Credit Card from American Express and earn the welcome bonus (currently 25,000 Starpoints after you spend $3,000 on the card within the first three months), you can still earn a separate bonus when you welcome for the Starwood Preferred Guest Business Credit Card from American Express.
This is also applicable to Citi cards. The general rule of thumb with Citi applications is that you must wait at least eight days between applications for personal cards (like the Citi Premier® Card), and you can't apply for more than two cards in a 65-day period. However, business cards follow different rules, as you can apply for one Citi business card (like the CitiBusiness / AAdvantage Platinum Select World Mastercard) every 95 days.
3. Business and personal accounts reside on separate lines of credit.
Even though a business card application will count as a hard inquiry on your personal credit report, the actual credit line is separate from your personal credit line. This can be especially helpful if you're starting a business and run up a large balance on the card, as it won’t lower your overall credit score by raising your utilization (which is a key factor used to determine your FICO score).
However, keep in mind that if you do wind up defaulting on a business card, an issuer can come after you personally.
4. Business cards tend to offer fewer protections and come with higher rates and fees.
Business credit cards are not monitored and regulated nearly as closely as personal credit cards. As a result, issuers typically provide fewer protections and charge higher interest rates than for comparable personal products. These companies can even change your APR or tack on additional fees and penalties without warning.
Hopefully you follow my 10 commandments for travel rewards credit cards and never carry a balance or make just a minimum payment each month, as these two activities will easily negate the value of any points or miles you’ve earned. If you're staying on top of your accounts, then the relative lack of protections shouldn't be much of a concern.
5. Business cards have different (and often more lucrative) category bonuses.
One of the easiest ways to maximize your points and miles is by taking advantage of credit card category bonuses. Fortunately, business credit cards tend to have different categories that offer bonus points and miles.
One of my favorites is the Chase Ink Plus, which offers 5 points per dollar on the first $50,000 spent in combined purchases at office supply stores and on cellular, landline, internet and cable TV services. TPG’s most recent valuations peg Ultimate Rewards points at 2.1 cents apiece, meaning that these purchases earn you a return of 10.5%. The card currently offers a sign-up bonus of 60,000 points after you spend $5,000 in the first three months after account opening.
Another great example is the Business Gold Rewards Card from American Express OPEN. This card recently updated its bonus categories to offer 3 Membership Rewards points per dollar spent in a category of your choice, including airfare, shipping and computing. The card currently offers a bonus of 50,000 points after you spend $5,000 in the first three months of card membership.
For additional information, check out Richard Kerr’s guides to maximizing bonus categories:
- Gas stations
- Grocery stores
- Office supplies
- Rental cars
- Hotel stays
6. Business cards have different perks.
In addition to the different bonus categories, business credit cards also offer a variety of unique perks that tend to apply to businesses, but may also be valuable to individuals. For example, cardholders of The Business Platinum Card® from American Express can enjoy the same lounge access and Boingo Wi-Fi service offered by the personal The Platinum Card® from American Express, but they’ll also receive 10 Gogo Inflight Wi-Fi passes each year. This can be a great way to stay connected while in the air, especially because it's available on any Gogo-equipped flight (which isn’t restricted to a specific airline).
Another great perk is the OPEN Savings Program available on all American Express small business cards. This allows you to earn a 5% discount (or two extra Membership Rewards points per dollar spent) at a variety of merchants including Hyatt, Hertz and FedEx. You can even get a better return on Hyatt stays by paying with one of these cards than you would with the Hyatt Credit Card — one example of when the right card is the wrong choice for making a given purchase.
Business credit cards can help a variety of small businesses maximize purchases by offering bonus points and miles in relevant categories. They can also help you gain access to additional perks and welcome bonuses that can pad your loyalty accounts. Hopefully this post has clarified how these cards work and how they differ from personal versions, so that you can better take advantage of both.
What are your experiences with applying for (and using) business credit cards?