Credit cards are confusing enough, then when you add in the “business” label to them, the confusion is magnified. What exactly makes a business credit card different from a personal credit card? Here’s a clear and straightforward explanation.

The Requirements – Contrary to popular belief, you don’t actually need to be part of a corporation or LLC to open one. In fact, on the application it will ask for your business name and tax ID and you can just enter your personal name and Social Security for those fields, respectively.

So in a nutshell, an individual can legally open and apply for a business card. The rules on the application will probably state you need to use it “for business purposes only” but aside from that requirement, there’s really no difference between opening one of these and opening a personal card.

And even if you do have a corporation or LLC, you will still need to provide your personal name and Social Security on the application. Why? Because this account will go off of your personal credit. That means if you flake on paying the bill, it will tarnish your credit history in the same way any other default would (to get one without your personal credit would require a “corporate credit card” which is a whole other beast).

The Rewards – Have you ever noticed how the best credit cards for business usually have rewards that trump the personal cards?

For example, the Chase Ink offers 5% cash back. That in and of itself is not that unusual, but the difference with the Chase Ink is that the first $25,000 spent annually in the categories get 5%. Compare that to a personal card like the Chase Freedom or Discover More, which caps the 5% at $1,500 in category spending per quarter.

Why is it like this? Simply put, business credit cards are much more profitable for the banks. Merchants pay higher processing fees on them and businesses typically charge more than the average consumer does. For these reasons, you usually get more generous rewards with a business card.

The Benefits – This is where the contrast between the two types isn’t so clear-cut. Why? Because some benefits are better on business cards, while others are clearly inferior.

Take the American Express Premier Rewards Gold Card as an example. It’s a personal card and offers car rental coverage worldwide (minus a small handful of countries). Meanwhile, the American Express Business Gold Rewards Card is comparable. It also costs $175 per year but unlike the personal version, it only offers rental coverage domestically. The same holds true for the AmEx Platinum Cards, too.

However on the flip side of the argument, some business cards offer benefits you won’t get with a personal version. For example the no annual fee AT&T Universal (a biz card) will give you primary rental coverage instead of secondary. Surprisingly, you won’t even get that on the $175 AmEx Premier Rewards Gold Card.

So when it comes to benefits, there’s no clear cut winner between the two types.

The Interest Rates – Now this is where the personal cards will almost always beat business, hands down.

Why? Because the 0% promotions are much more generous on personal. It’s not uncommon to find offers that give you a 0% rate on purchases and balance transfers for 18 or 21 months. When it comes to biz cards, you will be hard pressed to find one that gives you 0% for 6 or 12 months.

However the standard (non promotional) interest rates with business cards on average tend to be about 1 or 2% lower. So in that sense they are superior but I think most people would agree a long 0% offer is far more desirable! Not to mention, business cards are exempt from the Credit CARD Act of 2009 (the reforms for consumer protection) so there’s no law to protect biz cards from unexpected interest rate hikes, etc.

Conclusion?

Don’t let the “business” label fool you. With the exception of the above points, a regular and biz card basically operates in the same manner. The most important thing I think for you to remember is that BOTH types will hurt your personal credit, in the event of a default. So don’t wrongly assume that just because it’s a “business” card, it won’t affect your credit if you stop paying the bill… because it will.

Mike wrote this guest post. As the guy behind CreditCardForum.com, he likes to joke that has a PhD in the world of credit card information.