Are Individuals Allowed To Use Business Credit Cards?

Anyone that pays attention to credit card rewards knows that often times, the ones for business have the most generous programs. Why is that? Is it possible for individuals to get these cards, too?

Business credit cards are more profitable
First and foremost, these cards are huge money makers for banks. Actually, let me re-phrase that… under healthy economic conditions they are big money-makers (because during the recession, some issuers saw more than 1 in 8 business accounts defaulted on).

There’s three reasons why these cards are more profitable:

Reason #1: higher processing costs
The interchange fees (processing fees) on business credit cards are more expensive than regular credit cards. In turn, the bank is making more money on spending. On a related note, if you think the fees are hurting consumers you may wish to read this blogpost.

Reason #2: higher spending
Historically speaking, business cards have more charged to them than the average personal card does. Many businesses will funnel all their expenses through their card, making them extremely lucrative for the bank. In turn, high rewards are used as an incentive to recruit new cardmembers.

Reason #3: exempt from credit card reform
The economy may still be fragile, but card issuers have yet another reason to love ‘em now… business credit cards are exempt from the reform that went into effect recently. Obviously this means there is the potential for more profit from interest rate hikes, late fees, etc.

When you take these reasons into account, is it any wonder that banks are so generous with the reward programs on business cards?

Is it possible to apply as an individual?
You may be surprised to learn that many times, individuals can apply for a business card. How is this possible? Well, if you are a sole-proprietor, you might be able to apply under your Social Security number and use your legal name as your business name.

However just because that’s an option, it doesn’t necessarily mean you are allowed to use the card for personal spending. I advertise the Chase Ink credit card on my website and upon reviewing the application, it says:

By becoming a Visa Business Card cardmember, you agree that the card is being used only for business purposes and that the card is being issued to a public or private company including a sole proprietor or employees or contractors of an organization.

So for the Chase Ink credit card, if you are a sole proprietor if must be used for business purposes only. That being said, I have come across a few business cards from other issuers that don’t mention this rule.

Conclusion?
I have read about many people on my forum that claim to have business cards and use them as if they are personal cards without encountering any problems. However, I advise against doing that because it might be violating the card issuer’s rules.