Small Business Funding Options: Business Credit Cards vs. Consumer Credit Cards

Credit cards are a common part of daily life, in both a personal and business respect, for many. Small business owners have the option to finance much of their day to day on a credit card. Should they use a business credit card or their personal credit card? What is the difference? Which one is best? The answer is, it depends.

Business Credit Cards

Business credit cards offer many advantages to small business owners that can be a huge benefit. The most notable is the availability of a higher credit limit and the ability to carry a large balance if necessary. This can allow business owners to take advantages of bulk discounts on inventory, replace and repair minor equipment as needed, and even float expenses temporarily if cash flow becomes an issue. All of this is possible without affecting the consumer credit score at all. Large balances would affect the consumer credit score negatively, but that is not the case with a business credit card. Additionally, if you rack up purchases but are able to pay them off on time in full, it will help build your business credit score.

Related Article: When is it OK to Fund Your Startup with Credit Cards?

Personal Credit Cards

Using your personal credit cards for business purchases ensures the purchases are covered under the Credit Card Act of 2009. Some business credit cards are covered but that is very rare. Cards that are covered are required to give a 45 day notice before a rate change, do not increase rates unless the minimum payment is 60 days overdue, and offer a 21 day grace period. In addition, if you are handling the payments wisely, using your consumer credit card for business purchases could actually help your personal credit, if that is a goal.

Which One is Best?

It depends on your goal. Rewards options are pretty much the same with both types of cards. The question then is, do you need to increase your consumer credit score, and can you handle your business purchases on your consumer card in a way that the result would be positive? If so, then go for the consumer card. However, if you need to carry larger balances, as many small businesses do, and you need to protect your personal credit, a business credit card is hands down the way to go. Really the choice is personal, you just have to make an informed decision on which option is best for your personal and business situation.

Running a business usually requires all types of financing, from business credit cards to equipment financing and more. Biz2Credit can help you out with all of it by matching you with lenders from your extensive network that offer just what you need. Visit Biz2Credit.com today to find out more.