drazen_/getTyimages;Illustrated by Hunter Newton/Bankrate
Whether you’re a freelancer or own a business with hundreds of employees, having a dedicated credit card for your business can make a lot of sense.
For example, holding a business credit card makes it quite easy to separate all individual and business spending for tax purposes and bookkeeping. It also offers valuable protection and cardholder perks, such as cashback and points.
However, not all credit cards are created equal, and there are significant differences in debt liability, eligibility, and perks between small and medium-sized business and corporate credit cards. Read on to learn the best options for your business.
What is the difference between a business credit card and a corporate credit card?
Most of the differences between small and medium-sized businesses and corporate credit cards come from one important distinction. responsibility. With small business credit cards, debt usually rests on business owners. Business owners are personally responsible for paying debts acquired with business credit cards, and their credits are affected by account activities, whether good or bad.
With corporate cards, debt liability usually rests on the business itself. This means that business owners are generally not personally liable for their debts. The fundamental difference is why corporate credit cards tend to have stricter approval requirements than small business credit cards. Let’s dig into some of these distinctions.
Small business credit cards
Business credit cards are designed for small business owners, but generally function in the same way as traditional consumer credit cards. Businesses of all types and sizes, from side gigs to multi-million dollar empires, are eligible for business credit cards. To be approved for a small business credit card, you will usually:
- At least a fair personal credit score (but the higher one always gets better)
- Your business’s tax ID or your personal social security number called EIN
The best business credit cards for small businesses are generally more likely to qualify than corporate credit cards. Still, this option has its advantages and disadvantages.
Corporate Credit Card
Corporate credit cards, on the other hand, are designed for more and more established businesses. To be approved by a corporate credit card, it usually involves:
- Millions of annual revenue
- Established Business Credit History
- Company Status – C-CORP, S-CORP, or some LLC
Even if it sounds like your business, know that your corporate card comes with a share of your advantages and disadvantages.
Main differences between business cards and corporate cards
| Business Credit Card | Corporate Credit Card | |
|---|---|---|
| Who is responsible? | Business owners usually sign personal guarantees and hold themselves accountable for all obligations (including obligations charged by the employee’s cardholder). | Typically, employers do not need to assume responsibility for their debts (instead, liability falls on the entity). The employee’s cardholder may be partially liable for the debt. |
| Who is eligible? | All business types, including informal and unregistered businesses. Typically there is no required business size, business credit score, or revenue. | He has founded a company with millions of dollars of annual revenue, excellent business credits and the ability to meet high spending thresholds. Specific requirements vary by issuer. |
How to determine your business and business credit card
Below are some of the issues to consider when deciding between corporate cards and small business cards.
- Do you want to be an employee? Do you take joint responsibility for purchases made with cards? If you want employees to be jointly responsible for purchases made by card (including personal fees you will be charged), a corporate card is your best bet. If you just want to have a way to request a purchase from your employees and don’t mind taking all the responsibility, then a small business card account is fine.
- Want to earn traditional credit card rewards? Small business credit cards tend to offer better reward programs than corporate cards, and may even be able to earn the same type of rewards they earned with normal spending. For example, if you have a personal credit card that earns Chase Ultimate Rewards points, you can sign up for the Chase Business Credit Card, which offers the same rewards and pools all your points into one account.
- What card holder perks do you want? The perks offered on both types of cards vary. If you want consumer protection like business cards or travel insurance with 0% intro APR offers, then a small business credit card is probably a better bet.
Create a Switch: Move from a Small Business Card to a Corporate Card
If your business has grown into a place managed by hundreds of employees, we recommend considering a company’s credit card rather than the small business cards you’ve used in the past. It also makes sense to switch if you want to access detailed spending reports that some corporate cards offer, or if you want to jointly hold employees responsible for purchases they charge your account.
That said, corporate credit cards are generally ideal for businesses that generate millions of dollars in revenue each year, as well as for many employees who buy on behalf of their businesses. Your business will also need an established credit history before you apply. This will be reviewed as part of your corporate credit card application.
Conclusion
Getting a credit card for your business is an important part of being a business owner, and that applies whether you hire hundreds of people or yourself. Make sure you have the type of business credit card that is right for your business and that you have access to the tools and resources you want the most.
You also need to be able to earn cashback and travel rewards when using the best business credit cards. This can be added immediately if your business spends a lot on other purchases and inventory each month.
