Business credit cards are designed to be used for business expenses. But there might come a time when you’ll be tempted to use your business card to book a personal vacation or pay for a large non-business expense.
Maybe you’re trying to earn a lucrative sign-up bonus or reap those coveted business credit card rewards. While there are no legal repercussions to doing so, putting personal expenses on your business credit card is prohibited by most credit card issuers — and could lead to unnecessary complications around tax filing time.
Here’s what you need to know.
Business Cards vs. Personal Cards
The biggest difference between a business credit card and a personal credit card is that a business card is intended for business expenses only. “One of the reasons you have a business card is to separate your business expenses from your personal expenses,” says Tori Dunlap, founder of Her First $100K and host of the Financial Feminist podcast. That’s because business expenses are often tax-deductible, and it’s easier to separate out those expenses if they’re all on one card.
Business credit cards come with other benefits as well. If you have a growing team, Dunlap says, your employees can be authorized users on the business credit card account, which saves them the hassle of having to request reimbursement. And business credit cards often come with higher spending limits and bonus rewards in certain business categories. For example:
- The Ink Business Preferred® Credit Card earns 3X points on shipping purchases, telecommunication services, advertising, and travel up to a combined $150,000 per year.
- The American Express® Business Gold Card earns 4X points on the two categories in which your business spends the most each billing cycle, on up to $150,000 in combined purchases per year.
The main drawback of business credit cards is that credit card issuers are not required to provide the same consumer protections that apply to personal cards, such as the ones detailed in the Credit CARD Act of 2009. That means you could have an APR increase on your existing balance or be charged exorbitant late fees. Keep in mind, however, that regardless of whether you’re using a personal or business card, you can ensure you’ll never need to pay any interest or late fees by paying your balance on time and in full every month.
If you like your personal credit card, consider signing up for a business credit card from the same issuer. You’ll be able to track both bills in the same spot and may even be able to combine rewards.
Personal credit cards, on the other hand, are designed for your everyday household expenses. Some come with straightforward cash back on every purchase, while others offer boosted rewards on bonus categories. For example:
- The Citi® Double Cash Card offers 2X points on every purchase with no annual fee.
- The Chase Freedom Unlimited® offers 5X points on up to $12,000 in groceries in your first year, 5X points on travel purchased through Ultimate Rewards, and 3X points on dining and drugstores.
Ink Business Preferred® Credit Card
- Intro bonus:100,000 points
- Annual fee:$95
- Regular APR:15.99% to 20.99% Variable
- Recommended credit:670-850 (Good to Excellent)
- Apply Now At Chase’s secure site
American Express® Business Gold Card
Can You Use Your Business Card for Personal Expenses?
It’s not illegal to use your business credit card for personal expenses, but there are tax implications. If you made a mistake and used your business card for a personal expense, you’ll just need to flag that expense for your records and be sure not to deduct the amount when you file your taxes. But all those little notes to self can make things very murky if you start using your business card for personal expenses all the time, says Dunlap.
Furthermore, most credit card issuers strictly prohibit using your business credit card for personal use in their terms and conditions, which you’ll need to agree to when you sign up for a card. For example:
- The terms and conditions of the Chase Ink Business Cash® Credit Card says: “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.”
- The terms and conditions of the American Express Blue Business Cash™ Card says: “By submitting this application, you, as an individual and the Authorizing Officer of the Company … are REPRESENTING THAT ALL CARD(S) ISSUED ON THE ACCOUNT WILL ONLY BE USED FOR COMMERCIAL OR BUSINESS PURPOSES.”
Consequences of Using a Business Credit Card for Personal use
If you violate your credit card issuer’s policy, “your business card could get canceled or your limit could get restricted,” says Bola Sokunbi, Certified Financial Education Instructor, money expert, and founder of Clever Girl Finance. If your card is canceled due to a violation of the issuer’s policy, that could also mean you would lose all the rewards points you’ve earned on the card.
Even if there’s nothing in your agreement restricting personal use with your business credit card, you should keep your personal and business expenses separate. When it comes time to report your deductible business expenses come tax season, you’ll be happy that they’re all in one place and not mixed up with your personal expenses.
Impact to Your Credit Score
Just like you build a good personal credit score by making on-time payments and keeping your balances low, paying off your business credit card on time and in full can help you build credit for your business. But depending on the issuer, your business credit card payments may also be reported to the three major consumer credit bureaus. For example, Capital One always reports all account activity, while American Express only reports if your account falls out of good standing.
Sokunbi notes that there’s also a difference between a business credit card that is tied to your personal credit and a corporate credit card. “A corporate card, which is another type of business card, would be a card that’s tied to your business tax ID, but then the business itself has collateral or a credit profile that has been used to establish this line of credit for the business,” she says.
Not everyone who applies for a business credit card will have the business credit history of a corporation. “You can have a business card if you’re a freelancer or even if you’re a side hustler,” says Dunlap. “A lot of times when people have business credit cards, they are tied to their personal credit,” Sokunbi adds.
Depending on the credit card issuer, you may need to provide your personal social security number, your business tax ID, or both when applying for a card. Using your business credit card could affect either your business credit score, your personal credit score, or both, so be sure to use it responsibly.