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 business-related purchases. Business is in the name, after all. However, there’s a strong case to be made for using personal credit cards to cover business expenses instead.
First, 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 credit 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.
Next, 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.
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Can I Use A Personal Credit Card For Business Expenses?
The short answer to this question: Yes!
The long answer is hardly more complicated: Using a personal credit card is completely fine for business expenses. At the end of the day, personal and business credit cards functionally do the same thing by making purchases on credit. This means that as long as you properly track your business expenses, it shouldn’t really matter if you buy something with a personal or business credit card.
However, there are some things to keep in mind. If you intend to give employees their own credit cards, applying for a business credit card with free employee cards could be an excellent option — personal credit cards aren’t exactly great when it comes to requesting and tracking additional cards.
Additionally, business credit cards often come with rewards, welcome offers, benefits, and other perks targeted directly at small businesses. If there isn’t a personal credit card with rewards that match your business’s spending habits, there might be a business credit card that will work for you. As such, it usually makes sense to shop around by looking at both personal and business credit cards before making a final decision.
Using Personal Credit Card For Business: Best Practices
If you’ve decided a personal credit card is right for your business, here are five of our favorite tips:
Use A Separate Card For Business
One thing you’ll want to avoid is commingling business and personal expenses. A good way to keeps things separate 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 your existing personal card’s purchase history line-by-line to determine which purchases were business-related and which weren’t.
Keeping your business purchases confined exclusively to one card is especially helpful at tax time. Limiting 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.
Keep Your Credit Utilization Low
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. To help alleviate the hit to your score, keep your credit utilization ratio — the amount of debt you have versus the amount of your credit limit — low. It is generally recommended that the amount of available credit you utilize is kept below 30%.
Note that it doesn’t matter whether you make personal or business purchases on your credit card. All debt owed on your credit card is treated the same when calculating the credit utilization ratio. As such, all purchases made on a personal credit card will affect your personal credit history’s credit utilization ratio.
Make Your Payments In A Timely Fashion
Of course, if you can hurt your personal credit score with a credit card, you can also help your credit score. The easiest way to help your score is by making payments on time. By consistently paying off your bill on time, you’ll be able to improve your credit by showing that you are a trustworthy credit borrower.
The fact that you can improve your personal credit score is actually a huge plus to using a personal credit card for business purchases — creditors don’t typically report business credit card activity to consumer credit bureaus. This also means that you should only place purchases on your credit card that you know you can pay off. It’s not worth being saddled with extra debt that can be subject to interest rates and could negatively impact your credit score.
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, business-related purchases can end up sapping your personal funds. Don’t do it!
Know When To Graduate To A Business Credit Card
As your business grows, you may find that a personal credit card won’t cut it. This is especially true if you eventually want to get employees their own credit cards. In this case, finding a business credit card could become the right option — many offer free employee cards that are easy to request and hand out.
Your business’s spending habits may change over time as well. If this happens, you might find that there is no personal credit card that offers the best rewards for your business. Instead, a business credit card with business-focused rewards may become a great choice.
Find The Right Credit Card For Your Business
Hopefully, we’ve put your mind at ease on whether it’s illegal to use a personal credit card for business purposes.
Ultimately, the decision to use a personal credit card will depend on what your business needs a credit card for. Both business and personal credit cards can be great options for many different kinds of businesses. To help you on your journey, we recommend that you take a look at some of the best business credit cards on the market today. If those cards don’t suit your needs, it may certainly be worthwhile to shop for a personal credit card.
Jared Beilby
Jared is a writer hailing from the Pacific Northwest. Besides writing for Merchant Maverick, he has experience writing about sports and video games. He holds a Bachelor of Arts in Journalism from George Fox University.
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Thanks for an excellent post! While I know that many card issuers don’t like people to use business cards for personal use, are there any card issuers that don’t like personal cards to be used for business uses?
This comment refers to an earlier version of this post and may be outdated.
Hi Adam,
No card issuers will have any problems with you using a personal credit card on business expenses. Following the best practices outlined in this article will help you manage your business finances, but in no instance will a card issuer have any problem with you using your personal credit card in this way.
This comment refers to an earlier version of this post and may be outdated.
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
This comment refers to an earlier version of this post and may be outdated.
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!
This comment refers to an earlier version of this post and may be outdated.
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?
This comment refers to an earlier version of this post and may be outdated.
Hi Ryan!
This really all just depends on what your company reimbursement policy is.
This comment refers to an earlier version of this post and may be outdated.
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!
This comment refers to an earlier version of this post and may be outdated.
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.
This comment refers to an earlier version of this post and may be outdated.
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.