A Guide To Using Personal Credit Cards For Business Expenses
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It may seem natural to use a business credit card when you’re making purchases on a business’s behalf — whether it’s your business or you’re an employee — but there’s a strong case to be made for using personal credit cards to cover business expenses instead.
First of all, the CARD Act of 2009 provides a number of legal protections to users of personal credit cards — legal protections that don’t apply to business card users. If you use a personal card, you can’t have your introductory APR revoked before six months have passed, nor can you be charged excessive fees for minor infractions. You also can’t have your APR raised without first having 45 days’ notice of the change. While business card issuers often extend these protections to consumers as a courtesy, this isn’t a universal practice.
You might also find that the rewards programs associated with personal credit cards fit your spending patterns more closely than the incentive programs of business card issuers. Whatever the reason, using a personal credit card to cover business purchases is a common practice, and there’s nothing inherently wrong with it. However, that’s not to say there aren’t any pitfalls to avoid.
Here are some tips for using personal credit cards to cover business expenses.
Table of Contents
- Use A Separate Card For Business
- Don’t Use Your Debit Card
- Be Wary Of Affecting Your Personal Credit Score
- Pay Off Your Card As Soon As You’re Reimbursed
- Record Everything
- Pick The Personal Card That Fits Your Business Spending Profile
- Use It Or Lose It
- Try To Get Reimbursed As Soon As Possible
- Final Thoughts
Use A Separate Card For Business
One thing you’ll want to avoid is commingling business and personal expenses. A good way to avoid this is to use a separate credit card for your business purchases, even if that card is a personal card. This way, you won’t have to go through all your purchases one-by-one on your existing personal card to determine which purchases were business-related and which weren’t.
Keeping your business purchases confined exclusively to one card is helpful in several ways. If you’re an employee, you’ll be able to report your business expenditures more easily. And regardless of whether you’re an employee or the owner of a business, confining your business purchases to one separate card will make dealing with the IRS less painful in the event of an audit. If you charge business and personal expenses on the same card, you may have a harder time proving to the IRS that your business charges really were for business purposes.
Don’t Use Your Debit Card
Even if you don’t get a separate card for business use, whatever you do, don’t make business purchases on your debit card. Doing so is a good way to get a hold placed on your own money.
Entities such as hotels and rental car agencies will typically place a hold on your card — often for hundreds of dollars. In this way, work-related purchases can end up sapping your personal funds. Don’t do it!
Be Wary Of Affecting Your Personal Credit Score
If you use a separate personal credit card for all your business-related expenses, know that you can negatively impact your personal credit score with your business purchases. If you charge a large business purchase to your card, your credit utilization ratio will be affected until you get reimbursed. Your credit utilization ratio is the amount of debt you have vs. the amount of your credit limit.
For this reason, if you’re applying for a loan of some kind, you might want to avoid doing so while you have a large as-yet-unreimbursed business expense on your card. If you don’t, you may well end up paying a higher interest rate on your loan.
Of course, the positive aspect of this is the fact that if you make your payments and use your personal card wisely, you can improve your credit score in a way you can’t with a business credit card. That’s because when you use a business card, your transaction history typically doesn’t get reported to the consumer credit bureaus.
Pay Off Your Card As Soon As You’re Reimbursed
A recent report from CareerBuilder found that 78% of full-time workers in the US live paycheck to paycheck. With this as our grim reality, it’s no wonder that many workers are tempted to use their reimbursement funds to pay other bills. However, you should avoid doing this if at all possible.
If you don’t pay down your card with your full reimbursement amount, you’ll be paying interest on a purchase that wasn’t even for you. Unless doing so would make you homeless, pay off that card as soon as you get the reimbursement check. Otherwise, you’re just throwing money away in the form of interest payments.
Record Everything
A good way to both streamline the reimbursement process and satisfy the IRS in the event of an audit is to be meticulous about recordkeeping. Use a smartphone app to save pictures of receipts from all your business purchases, along with images of the reimbursement checks you receive (or screenshots of the direct deposit).
You may even want to jot down additional information on your business receipts before archiving them, such as the people who were with you and the date/time of the transaction. Generally, the more information you can provide about your business purchases, the better — whether it be to the IRS, or if you’re an employee, to your boss.
Pick The Personal Card That Fits Your Business Spending Profile
Naturally, when you’re considering which credit card to use for business expenses, you’ll be comparing interest rates and fees as you seek the best deal. However, don’t forget to compare the rewards programs of the personal cards you’re considering as well.
The nature of your business will determine the sort of items and services you’ll be charging to your new card. Be sure to choose a card with rewards you’ll be in a position to take advantage of. Let’s take a look at a few personal credit cards you can use to cover business expenses.
QuicksilverOne from Capital One
QuicksilverOne from Capital One |
Annual Fee: $39
Purchase APR: 26.99% (variable) |
|---|---|
QuicksilverOne® from Capital One® can be good for business spending if you have average credit. To start, this bit of plastic offers an unlimited 1.5% cash back on all purchases, with no restrictions on purchases or spending caps.
Capital One also bundles in an excellent array of extra benefits, including the ability to raise your credit line after five consecutively made payments and $0 fraud liability.
Note that the card does require an annual fee. However, at $39 per year, QuicksilverOne’s annual fee is much lower than most cards.
Read more about the QuicksilverOne with our review.
US Bank Cash+ Visa Signature Card
U.S. Bank Cash+ Visa Signature Card |
Annual Fee: $0
Purchase APR: 13.99% - 23.99% (variable) |
|---|---|
If you’ve got excellent credit, the US Bank Cash+™ Visa Signature® Card might just help you out.
The card’s primary draw is the 5% cash back you’ll earn on the first $2,000 worth of purchases per quarter in two categories of your choosing. You’ll then get an unlimited 2% cash back on one other, every day category (like gas stations, grocery stores or restaurants). All other purchases (and purchases in the select categories past the $2,000 mark) net 1% back.
Note that the selectable categories are subject to change every quarter. Of course, if you don’t mind keeping track of the categories and you vary your business spending enough to take advantage of the high-earning categories, you stand to make some nice cash back with this card.
Use It Or Lose It
Remember: If you get a personal credit card to use for business expenses, make sure you actually use it. If you go for a long time without charging anything to the card, your credit card issuer might shut down your account due to inactivity. This can negatively impact your credit score.
Try To Get Reimbursed As Soon As Possible
If you’ve ever worked at a company where you’re expected to cover business expenses, you know how frustrating it can be when your reimbursement doesn’t come in a timely manner. It impacts the amount of credit you have available, and — as I’ve discussed — it can affect your credit utilization ratio as well.
Try to ensure that your company’s reimbursement policies are reasonable before agreeing to make business purchases on behalf of the company. If there’s a delay in receiving your reimbursement, and, as a result, you have to pay finance charges, insist on being reimbursed for that as well. No employee should be made to suffer negative consequences as a result of a company’s lackadaisical reimbursement practices.
Final Thoughts
For both business owners and employees, it’s perfectly reasonable to use a personal credit card to cover business expenses. By following these rules of thumb, you can avoid taking a personal financial hit when charging business expenses to your personal credit card.
Jason Vissers
Jason Vissers is a writer and cereal chef from San Diego. He graduated with a Political Science degree from San Diego State University in 2001. He's been writing about website builders, crowdfunding sites, online lenders, and credit cards for Merchant Maverick since 2015. Additionally, Jason can't eat raisins.
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This is a great article and it touched on something that I have been struggling with, as I am a frequent purveyor of my credit score. We own our own business and we use a personal credit card to pay for monthly business expenses, both to build credit and reward points. However, some months we have larger than normal expenses by a few hundred dollars. Even though we have paid the balance off every single month before, for years, my credit score takes a slight dip and it’s really frustrating that my payment history isn’t taken into account. Is there a strategy to avoid this? Thank you for your time, Page
Hi Page,
Great question! Unfortunately, it’s a bit outside our areas of expertise, but we think this Experian article might be helpful to you. Good luck!
I had a question I am having a hard time finding an answer to. If I purchased an item (say a printer) for home use that work reimbursed me for (used it mainly for work purposes at home) is it my property still or does the fact that they reimbursed me legally make it the company’s property?
Hi Ryan!
This really all just depends on what your company reimbursement policy is.
Hello There!
If i use my personal credit card for my business purchase products, and pay back through business account, am i allowed to do that?
This comment refers to an earlier version of this post and may be outdated.
Hi Ashraf,
You could do that, but it’s really best to keep business and pleasure separate, unless you are using a personal card exclusively for business purchases. As mentioned in this post, “If you charge business and personal expenses on the same card, you may have a harder time proving to the IRS that your business charges really were for business purposes.”
This comment refers to an earlier version of this post and may be outdated.
I just open new bussiness in US. I work for my bussiness and i pay for myself. Since i just start to run a bussiness. I dont know and need to learn a lots
So how can i pay for myself? Check or direct deposit to personal bank card?
Can i pay my salary from Bussiness Card to Credit Personal Card?
If i use Personal Credit Cards for expenses of Bussiness Card. Can i pay this Personal Credit Cards by Bussiness Card?
Thank you so much.
This comment refers to an earlier version of this post and may be outdated.
Hi Loan,
It sounds like you need to open an online payroll system and set up your business bank account to pay your personal bank account through direct deposit. A simple system like Square Payroll or Intuit Online Payroll would work best! I hope that helps! Good luck with your new business!
I’ve been using a personal card for my LLC real estate rental business for years. The nick-name on the card is the name of my LLC but the name on the account is obviously me. Recently I’ve been researching ways the “corporate veil” of an LLC can be pierced and I’m concerned about not having my LLC name on the card. My hope is that as long as I only use the card for this business I’m OK but I don’t know. It would seem that every small business using an LLC would have this issue. What do you know? I’m looking for what you know to be common practice, not legal advice so no worries there.
Thanks,
Steve
This comment refers to an earlier version of this post and may be outdated.
Hi Steven,
You are correct that keeping business and personal expenses well documented and separate is important in record keeping for that “corporate veil” protection you referred to in your question. As far as what’s common practice and how you should approach your card usage, I think this would be best answered by an accountant who understands your needs. We don’t want to offer advice that we may not be qualified to give. Best of luck!
This comment refers to an earlier version of this post and may be outdated.
After searching several sites, I have found no mention on whether or not a personal credit card used for both business and personal purchases has an annual fee which can be deducted for tax purposes. While the card is essential for business purchases; it is extremely convenient to also use the card for personal purchases too.
Also, if I am carrying a balance, conceptually speaking, shouldn’t I be allowed to deduct some of that interest since it it partially being charged for business purchases?
This comment refers to an earlier version of this post and may be outdated.
Hi Craig,
While a business credit card’s annual fee is tax deductible, a personal card’s annual fee is not tax-deductible. As for the card’s interest being tax deductible, that would be really complex to do for a personal card that’s being partially used for business because you’d have to calculate the share of the overall interest payments that’s going towards the business purchases. You’d likely need professional help with that!
This comment refers to an earlier version of this post and may be outdated.
If you put business expenses on your personal card and thereby earn airline or hotel points, or even cashback rewards, on your personal card (but are being reimbursed for these expenses by the business) is the value of those points/rewards considered taxable income/compensation to the employee? I think the answer is No though it might be a loophole in the system. But wanted to make sure.
This comment refers to an earlier version of this post and may be outdated.
Hi Edward,
This isn’t something we are too familiar with, so we can’t say for sure. However, after running a very brief search, based on our limited search results, it appears that the rewards in this instance would likely not be considered taxable income.
This comment refers to an earlier version of this post and may be outdated.
I have a question..
Am I to pass those rewards I earn from legitimate business purchases onto the business?
For instance:
I earn 3% cashback on fuel purchases. Can I keep that 3% for myself & have my company reimburse me to fuel up the company vehicle..or..am I to give that 3% to the business?
This comment refers to an earlier version of this post and may be outdated.
Hi Jenn,
This isn’t something we know too much about, but we did a little digging around and found that in your scenario, it appears that you could keep your rewards.
This comment refers to an earlier version of this post and may be outdated.
My dad worked/traveled for business with an accounting software firm for over 20 years. He used various business credit cards to pay for all of his expenses; flights, meals and hotels. Regardless of the card he used, the rewards were his to keep, as were the loyalty points for the hotels and the frequent flier miles. This is an industry perk for employees who foot the bill upfront and wait for company reimbursement each month. His accounting software company is a publicly traded company, Tyler Technologies, so I have full confidence they know the rules.
In order to make the monthly payments of my personal card from my business account. Do I need to reimburse myself as an employee through PAYE or can I make the payments directly from my business account to my personal credit card?
This comment refers to an earlier version of this post and may be outdated.
Hi Jordan,
This is a bit outside our expertise. I’d recommend consulting a tax professional familiar with how PAYE works in your area, as it appears it is specific to the UK/Australia.
This comment refers to an earlier version of this post and may be outdated.
Thanks for sharing. However, it soars another question. Is it ethical for the CEO or BOD of a 501(C)3 to request company bills be paid through his personal credit card specially to earn reward points and the company reimburse his credit card bill? When the company had the funds to pay the bills originally?
This comment refers to an earlier version of this post and may be outdated.
Hi Mfc,
This isn’t something we’ve encountered before, so we don’t want to give any advice we aren’t qualified to give. However, after doing some quick research, it seems 501(c)(3) tax-exempt organizations can run into trouble with their tax-exempt status if they operate in this way.
This comment refers to an earlier version of this post and may be outdated.
wow very nice and helpful article,i think this blog is very helpful for everyone and me.
i got many information from here.thanks a lot for sharing this post. good job keep it up.
This comment refers to an earlier version of this post and may be outdated.