Did you know it’s common for entrepreneurs to settle business expenses using their personal credit cards? While it isn’t illegal to do the opposite, numerous tax implications are associated with paying for personal expenses using a business credit card. We recommend using separate personal and business credit cards for your home and work, respectively.
If you’re keen to know how these types of credit cards differ, read on!
1. Rewards and Benefits
One of the main differences between personal and business credit cards is the rewards and benefits of owning them.
Cash back points and travel credit cards are examples of personal credit cards that reward holders for using the card to settle personal expenses like groceries and fuel. In contrast, business credit cards offer rewards and discounts on business-related expenses like airport lounge access for business trips and rebates on office supplies.
2. Credit Limits and Interest
The credit limits and interest charged on personal and business credit cards differ substantially. Most banks like Scotiabank tie the limit on personal credit cards to the salary earned by the cardholder. In comparison, business credit card limits are higher because they’re tied to the company’s profitability. The gulf in earnings is also why the interest charged on business credit cards tends to be higher than on personal credit cards.
3. Cardholder Liability
Another key difference between personal and business credit cards pertains to liability. Both cards subject holders to harsh penalties should they be charged with engaging in fraudulent activities. However, the extent of liability depends on the crime.
For instance, if you use your business credit card to cover personal expenses to skip tax payments, you could be sentenced to prison for up to 14 years. In contrast, stealing and buying things using someone else’s personal credit card will land you in prison for up to a decade.
Struggling to decide which cash back credit card to use to minimize personal expenses? Unsure which travel credit card will help you make the most of business trips? Visit our website to view some of the best personal and business credit cards from top Canadian financial institutions.
We provide a wealth of information on some of Canada’s best personal and business credit cards based on factors like initial rewards and points rewarded. We also provide our own GCR rebates for members who apply through our website and are approved for the card.
Learn more about the top cash back credit cards in Canada for personal and business use by visiting Great Canadian Rebates.ca.