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Can You Use Your Business Credit Card For Personal Expenses

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Can You Use Business Credit Card for Personal Expenses?

A number of card issuers have banned charges to buy cryptocurrency, yet a quick search online will give you more than a few results with options to put cryptocurrency on your credit card. But even if you can put cryptocurrency charges on your card, it doesnt mean you should. Youre trying to grow your business capital, so dont use a credit card as a source of cash.

I see a business credit card as something that should be used with great caution, says Downs. Its easy to get behind on payments.

Remember that investment can go down as well as up, plus you will owe transaction fees. That is a recipe for a pile of high-interest debt.

Create A Plan For Using Business Rewards

Tally up the rewards you expect to earn from your business spending each year and consider how to use them to your best advantage.

Much like consumers, small business owners tend to think of credit card rewards as an afterthought, Cetera says.

Taking the time to make a purposeful plan instead can allow you to reap maximum benefits. For example, using rewards to get merchandise rather than gift cards to give your employees for a job well done may allow you to avoid having to report a gift as income for your employees. The IRS says you may skip reporting some low-value gifts like flowers or fruit baskets but not cash or cash equivalents like gift cards.

Tips For Business Credit Cards:

  • Business cards can give you that much-needed revolving credit. But credit cards must be used wisely.
  • Choose the right card for you and your business. Some cards come with a host of benefits that include travel and insurance, but also carry high annual fees. If you do not require these benefits, then go in for a simpler card that doesnt carry charges and annual fees.
  • Analyse your monthly statements and verify all transactions.
  • Use your statements to budget and cut costs.
  • Always know all the features of your credit card. Business owners can restrict employee expenditure and also impose restrictions on certain categories. Use these options wisely to ensure the best value for your money.
  • These cards generally do not have add-on card options for your family members as the company will be paying the bills.
  • SMS and email alerts are available on almost all cards to get instant notifications about transactions on the credit cards.

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May Violate The Cards Terms Of Service

You remember those terms you agreed to when you opened your card? It turns out that putting personal purchases on your card may actually violate those terms. Business credit card terms may specifically disallow personal expenses, said Cabell. Youll generally make your own spending decisions and your card issuer may not check your transactions. But in the end, youre responsible for your purchasing activity, and violating the terms of service you signed could have consequences.

You May Not Be Entitled To The Same Protections You Get With A Personal Card

Why Use a Business Credit Card? Here are the Top Reasons

When you use a personal credit card, youre afforded certain protections by federal law. But not all of those safeguards apply to credit cards issued for business, Florida-based consumer protection attorney Donald E. Petersen points out.

Petersen outlines the protections consumers who use business credit cards lose:

  • You may have less time to dispute fraudulent charges if your card is lost or stolen.
  • You may have a harder time disputing a charge in cases where a charge was incorrect or where goods or services werent received.
  • You may lose protections from debt collectors, who could harass business-card debtors by calling at odd hours and calling frequently, along with other inconvenient collection practices.

Additionally, issuers who are required to give personal cardholders notice before increasing interest rates or upping late charges dont have to adhere to the same practices when it comes to business credit cards.

However, Petersen adds that some credit card issuers do offer more generous protections to consumers who opt for their business cards. So when youre shopping around for a business credit card, be sure to read the pricing and terms carefully to ensure youre protected.

Also Check: How Do I Check My Cabela’s Credit Card Balance

Many Business Credit Cards Dont Report To Credit Bureaus

As long as you keep your business credit card current and in good standing, most banks do not report business credit cards to credit bureaus. This helps to keep your personal and business lives separate and can help you get approved for personal loans in the future.

When a business credit card does not report to your personal credit report, it helps you in a few major ways:

  • New business credit cards do not affect your ability to apply for a personal credit card if they arent on your credit report.
  • If you have a high on your business credit card, it wont affect your credit score.
  • The minimum payment due wont affect your debt-to-income ratio when applying for a mortgage, car or another major personal loan.

While many business credit cards do not report to your personal credit report, business cards from Discover and Capital One do. Keep in mind that late payments and charge-offs on a business credit card will report to your personal credit report if you have personally guaranteed the card, no matter which bank issued it.

Expenses You Should Never Charge On A Business Credit Card

Every now and then, a personal expense finds itself on a business credit card. While not illegal, this makes the life of your accounting team more difficult. We have written extensively about what you can do if this happens here. In general, companies have clear policies on what to do when this happens, and yet most people fail to adequately compare the risks to the rewards when it comes to business credit cards. This short article will give you a couple of examples you should be mindful of when you are out spending.

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Rule #: If The Cards Not Right Dont Simply Cancel It

Just as closing a personal credit card might harm your personal credit score, closing a business credit card can potentially have a negative impact on your business credit score. Closing a card reduces your available credit. If your credit report shows youre carrying a balance on any credit card, closing a card increases the overall percentage of credit youre using your credit utilization ratio.

Related reading: Does closing a business credit card affect my credit score?

Lets say your credit report shows you have $20,000 in credit card balances and $100,000 of available credit . In this scenario, your credit utilization rate is 20%. Now, imagine that you decide to cancel a card with a $40,000 limit and a $0 balance. Your utilization rate would jump to 33% because your available credit is now $60,000 instead of $100,000.

Now, business credit scoring is typically less transparent than personal credit scores. We dont always know precisely how much utilization plays a role in business credit scores.

With some business credit-scoring models, like Dun & Bradstreets PAYDEX Score, your companys credit utilization rate doesnt influence its credit score at all. But business credit card utilization is a factor listed by at least one of the major business credit bureaus Experian.

Experians business credit-scoring model assesses the following factors:

Related reading: What to do before you close a credit card

Personal Cards Do Not Build Business Credit

Can you use a BUSINESS CREDIT CARD for Personal Expenses? I Business or Pleasure?

Building credit is important in both your personal and business life. When you use your personal credit card for business expenses, you are not building your business credit history. Just like building your personal credit history is important for loans like mortgages and car notes, adding positive trade lines to your business credit report is important for future business lending needs.

As your business grows, you may want to apply for an equipment lease, purchase a building or seek funding for expansion. A strong business credit history will improve your chances of getting approved.

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Purchases Will Have Limited Consumer Protections

When you use a business credit card, you may lose protection on certain purchases that you would have had if youd used a personal credit card. Thats because business credit cards are not regulated by the same protections as consumer credit cards. Many of the CARD act protections dont apply to business credit cards. These protections include:

  • Prevention against raising interest rates without notice
  • Prohibition of interest rate increases on existing balances
  • Prohibition of interest charges on debt paid on time
  • Application of payment to highest interest rate charges first

Congress has introduced a bill to include these protections for business credit cards, but nothing has gone through yet.

Other concerns when making purchases with a business credit card are that you have less time and more difficulty disputing charges. You also have fewer protections against how debt collectors choose to handle collection.

Rule #: Take Advantage Of Spending Bonuses

Along with welcome bonuses, you could earn big rewards by getting a business credit card that rewards you for annual spending. Such threshold bonuses typically are found on cards that offer airline or hotel rewards. Here are some examples:

The information for the CitiBusiness AAdvantage Platinum card has been collected independently by The Points Guy. The card details on this page have not been reviewed or provided by the card issuer.

You should only aim to take advantage of these bonuses if your business can justify this amount of spending and you travel frequently for work.

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Citibank Corporate Credit Card

With a streamlined expense report for travel and entertainment spends, the Citibank Corporate credit card offers access to top-of-the-line automation and higher savings.

Features of the Citibank Corporate Credit Card:

  • Earn rewards points on purchases made through the card that never expire.
  • Convenience through one-glance statements that provide a detailed summary of all linked cards.
  • Get access to exclusive savings and offers such as 20% off on dining spends in India and up to 55% off on travel, hotel stays and car rentals when purchased using the Citibank Corporate credit card.
  • Access statement information anytime, anywhere through the Visa IntelliLink Spend Management tool.

Wont Build Business Credit

Small Business Credit Cards

Your personal credit activity is reported to the consumer credit bureaus. Whereas your business activity is reported to the business credit bureaus.

Similar to your personal credit score, a business credit score is used by most business lenders to predict your companys ability to pay your bills in a timely manner.

Eventually youre going to want to improve this score. This will allow lenders to take a closer look at your business performance and ability to pay bills when determining the likelihood of providing your company with a loan.

Other companies you want to do business with may look at your business credit score. If this score is low, they may not sell you products or service necessary for the success of your business.

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Using Your Personal Credit Card For Business Expenses 5 Reasons To Reconsider

Although it may be more convenient to use your personal credit card for business expenses, you should be aware of the drawbacks of doing so.

Personal credit cards and business credit cards offer similar benefits, such as cashback rewards and travel rewards. Some credit card companies even offer 0% interest rate periods for both types of credit cards.

If you already have a credit card open in your name, its probably more convenient for you to put a business expense on it. Why go through the hassle of applying for a new credit card just for your business?

Although it may be easy to put business expenses on your personal card, you may be giving up certain perks that are unique to corporate credit cards. Plus, you may be missing out on some long-term benefits of using a business card instead.

Even if you dont own a business, you can get a business credit card for your side hustle. If youre interested in opening a credit card, visit an online marketplace like Credible to compare credit card interest rates and fees.

Here are five reasons you should consider using a business credit card for business expenses instead of your personal card:

  • Its easier to keep track of expenses
  • You wont be building business credit
  • You’ll miss out on earning credit card rewards
  • Most business credit cards arent listed on your credit report
  • You may be putting your business at risk
  • Pros/cons Of Putting All Spending On A Business Card

    As TPG pointed out several years ago, one reason why you might consider putting more than just business expenses on your business credit card is to prop up your personal credit score. Since many but not all business cards report only to the business credit bureaus, any spend you put on your business credit card will have no impact on your personal credit. This could help keep your utilization ratio low and your credit score high.

    But business credit cards generally have fewer consumer protections and higher interest rates and fees. Indeed, many of the consumer protections included in the Credit Card Act of 2009 dont apply to business credit cards. Issuers have voluntarily extended some protections, but a bill introduced in Congress in 2018 would have:

    • Prevented issuers from raising interest rates on small businesses without proper notice
    • Prohibited interest rate increases on existing balances
    • Prohibited interest charges on debt paid on time
    • Required any payment over the minimum apply to the balance with the highest interest rate.

    Unfortunately, that bill never got a vote.

    If you pay off your balance in full and on time every month, these proposed protections wont mean much to you, since they focus on cardholders who tend to carry a balance. That also means theres little risk in putting at least some of your personal spending on a business card.

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    What If You Accidentally Use A Business Credit Card For A Personal Expense

    Accidents happen. Its not an unlikely scenario for you to accidentally use your business credit card to pay for a personal expense. If this happens, you can repair the damage. For starters, make sure you flag the personal purchase so that it is not included in any of the bookkeeping for your business. Next, make sure you pay off the personal expense as soon as possible so that it doesnt take away from your available credit balance for your business. If you are not the sole proprietor of the business, you will also need to think about how you will report the mistake to the necessary parties in the business.

    Can I Use A Business Credit Card For Personal Expenses

    Can You Use Business Credit Cards For Personal Expenses?

    A business credit card is just like any other regular credit card, only that it is meant to be used by a business. So it will be tied to the finances of the business that requested the card, and it will be used to cover expenses caused by everyday business activities.

    Usually, there will be a limit on the amount you can spend on a business card, and if you have one, chances are that it has been given to you by the business that you work for. It is essential so that employers can cover the costs that might incur as part of the job or business.

    However, there is always that nagging temptation of could I get away with using a business card for personal expenses? Maybe not something big, but a few coffees here and there, a fancy lunch therehow much harm can it cause, right?

    But heres the thing, that credit card is intended for business expenses only, and your personal expenses arent included in that, so technically you would be stealing money from them.

    But anyway, lets address the main question: can you use a business card for personal expenses? You can definitely use it. The better question is whether you should or not, and whether it is illegal or not. So lets get into that!

    Read Also: How Do I Check My Cabela’s Credit Card Balance

    Consider Added Bookkeeping Benefits

    • Everyone gets a card, whether its virtual or physical: Set up account within 30 mins and get cards instantly,
    • Ability for yourself and your employees to manage your accounts on mobile,
    • Real-time access to transactions on your dashboard, and
    • Preset, freeze & unfreeze spending with just one click.
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