Both small business credit cards and corporate credit cards are used for business purchases, but there are many differences between the two types of cards. The impact on a cardholder’s credit score is one factor, but it’s not the only variable. There is much more that employees and business owners should know.
credit check
When you apply for a small business credit card, your lender will likely check your credit score. This difficult question should temporarily lower your score by a few points.
Corporate credit cards are unlikely to affect an individual’s credit score, but Experian reports that corporate card issuers sometimes check credit profiles of authorized users, resulting in Rigorous scrutiny on credit reports. By the way, I had two of her corporate credit cards, neither of which affected my personal credit.
If you are an authorized user of a small business credit card, it is unlikely that the issuer will verify your credit. However, derogatory information related to your account (such as delinquencies or large debts) may appear on your personal credit report. The good news is that these blemishes are usually easy to remove right away if you request removal from your account. credit will not be affected.
By the way, only a few well-known small business card issuers report all account activity on personal credit reports (eg Citi, Discover, some Capital One cards, etc.). Once your account reaches default status, the list of smaller business card issuers will grow much longer, impacting your personal credit report.
If you’re applying for a small business or corporate credit card, the lender will likely also check your business credit score (assuming your business has a credit profile). Also, using a small business or corporate credit card will definitely affect your business credit score.
Other key differences
Business scale
Corporate credit cards are for large businesses, often with an established track record of at least a few years in business and $1 million or more in annual revenue. Small business credit cards are, of course, for small businesses, but they are also suitable for sole proprietors, freelancers, gig workers, and more.
Many people are unaware of it. You don’t have to officially register your business to sign up for a small business credit card. If you don’t have an employer identification number from the Internal Revenue Service, you can apply using your Social Security number. One pitfall is that you are supposed to use your small business credit card for business-related expenses only.
reward
You would think that big companies that spend huge amounts of money would receive the best credit card rewards. It’s pretty poor in that it’s less than a cent.
Corporate credit cards tend to emphasize other selling points than perks. These include large lines of credit, additional cards for employees (which may have customized spending limits), easy integration with company accounting and expense reporting software, and lack of personal accountability. increase.
Small business cards, on the other hand, often offer very generous rewards and other useful perks. tend to concentrate on categories that are suitable for Small business cards also regularly offer lucrative sign-up bonuses.
personal responsibility
Corporate cards are usually guaranteed by the business, but smaller business cards are much more likely to require a personal guarantee from the cardholder (most likely the business owner).
In other words, if a small business goes bankrupt, the owner could be personally held responsible for paying back the card issuer. Their personal finances and personal credit score could suffer.
Employees using small business credit cards are likely to be authorized users, in which case we are not responsible for any unpaid charges.
Conclusion
A corporate credit card is a tool used by large companies and their employees to purchase equipment and pay for travel, entertainment, and other business expenses. If you use one of these, it is most likely provided by your employer and in most cases will not affect your personal credit score.
A small business credit card is a product that anyone can apply for for business purposes. These are much more intertwined with your personal credit history, especially if you are the primary account holder.
Have a question about your credit card? Please send an email to ted.rossman@bankrate.com. I will be happy to help you.
