Should I Use a Personal Credit Card for Business Expenses?

Quick Answer

While you can use a personal credit card for business purposes, there are many reasons to avoid it. Personal credit cards won't help you build your business credit, but they can damage your personal credit. They also don't provide the same rewards and perks tailored to small business owners.

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While you can use a personal credit card for business purposes, there are many reasons why a business credit card is better suited for the job. It's especially important to make sure you're separating your business and personal expenses so it's easier to manage your expenses for accounting and tax purposes.

Here's why you should make sure that you're using a business credit card for business purposes instead of a personal card.

How Business Credit Card and Personal Credit Cards Differ

For the most part, business and personal credit cards function the same way. You'll get a revolving line of credit that you can use to make everyday purchases, and once you pay off your balance, you can use your available credit again.

However, there are some key differences between business and personal credit cards, including consumer protections, credit limits, rewards and impacts on your credit score. Most of these differences make it less advantageous to use a personal card for business-related purchases.

Credit Scores

Most major business credit card issuers report your payments to the commercial credit bureaus instead of consumer credit bureaus. Commercial credit bureaus collect information to establish a credit history for your company. Most business credit card issuers don't regularly report balances and payments to the consumer credit bureaus, so you likely won't see any impact on your personal credit score unless your account is delinquent.

There are, however, some card issuers that do report business account activity to the consumer credit bureaus, so ask before you apply to make sure you know what to expect.

Business-Specific Rewards and Benefits

Rewards credit cards provide bonus rewards on certain spending categories, and that's no different for many business credit cards. That said, business credit cards tend to offer extra cash back, points or travel miles on business-specific expenses. If you can find a card that aligns with how your company spends, you could rack up more rewards.

Additionally, many business credit cards offer benefits that can help you better manage your company's finances. That can include integration with popular accounting software services, tracking and limits on employee credit card spending, discounts with business-related retailers and more.

Credit Limits

Business credit cards tend to have higher credit limits than personal credit cards because card issuers take into account both business revenue and personal income, and businesses tend to spend more money than the average household. Even if you don't have a lot of expenses right now, having more spending power can improve your options in the future.

Consumer Protections

One area where business credit cards don't have an advantage for small business owners is consumer protections. The Credit Card Responsibility and Disclosure Act, which limits how much card issuers can raise interest rates and regulates what fees they can charge, doesn't apply to business credit cards.

Fortunately, many major business card issuers have brought their terms in line with what personal credit cards offer.

What Happens if You Mix Expenses?

Mixing personal and business expenses, either on a personal or a business credit card, is generally not a good idea. Here are some potential issues you may run into:

  • Difficulty with accounting: If you use your card a lot, it can be challenging to remember which expenses were for your business and which were for your household.
  • Violating your card agreement: Personal credit card issuers allow you to use your account for business purposes. But if you have a business credit card, you're generally limited to using your account for business expenses. If you use a business card for personal expenses, the card issuer could close your account for violating the agreement.
  • Tax issues: When it's time to tally up your business expenses during tax season, mixing in some personal expenses could cause problems if the IRS audits your return. Additionally, while you can deduct credit card interest assessed on business expenses, the same isn't true for personal expenses, so you may have a hard time knowing how much to deduct.
  • Legal Issues: If your business is a limited liability company or a corporation, keeping your personal and business dealings separate is crucial to maintain the legal protections those entities provide. While the personal guarantee on a business credit card bypasses these protections, mixing business and personal expenses could lead to other liability issues.

Your Personal Credit Matters

Virtually all small business credit cards require a personal guarantee, which means that you agree to use your personal assets to pay off a balance if your company can't. As a result, business card issuers typically check your personal credit when you apply.

If your credit is in good shape, you may have an easier time getting approved for the best business credit cards. But if it needs some work, it may be more difficult to get the card you want.

Before you apply for a business credit card, check your credit score to see where you stand. If it's below 670, which is the threshold for a good FICO® Score , you may want to take steps to address issues on your credit report before you submit your application.

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