Can I Use a Personal Credit Card for Business Expenses?
Janet Schaaf is a freelance writer, editor and proofreader who considers reader advocacy to be her calling. After taking a few roads less traveled, Janet completed a bachelor’s degree in English Literature from the University of Missouri-Kansas City, with English Department Honors. She has been correcting grammar and checking facts since she could string a sentence together. For the past three years, Janet has focused on making personal finance topics understandable and relatable. Loan terms and credit card agreements can look overwhelming, but understanding what you’re agreeing to is paramount in grasping the impact debt can have on your life.
If you’re concerned about the legal implications of personal credit cards used for business expenses, rest assured it’s an acceptable and fairly common practice. However, just because it’s legally okay doesn’t mean it’s always the smartest move.
Depending on the type and size of your company, you might find it easier to track business expenses with a dedicated business card. Let’s take a closer look at the advantages and disadvantages of using a personal credit card for business.
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Pros for using personal credit cards for business
There can be several benefits to using personal credit cards for business expenses.
Better legal protections
Consumer credit cards generally offer higher levels of protection thanks to the following two acts.
- Credit Card Act of 2009
This act prevents credit card companies from raising APR rates unexpectedly. In fact, they can’t change your rate until the account has been active for at least one year, after which they must give 45 days’ notice outlining any upcoming increases. Companies are also prohibited from charging consumers excessive fees or penalties. - Fair Credit Billing Act (FCBA)
This act protects you in case of credit fraud by limiting your liability for a lost or stolen personal credit card to $50. Higher amounts are covered if you communicate the incident within 60 days..
However, most business cards are exempt from these two acts. Your lender might still offer rate increase and credit fraud protection for business cards, but it’s not required by law.
Variety of reward programs
One benefit of charging business expenses to a credit card is the rewards and sign-up bonuses. Fortunately, both personal and business credit cards offer various incentives. Depending on your specific needs, you might find it easier to max out the personal rewards.
For example, the Chase Freedom Flex℠ offers 5% cash back for rotating categories, which typically include streaming services, car rentals, gas stations, PayPal, movie theaters and eBay purchases.
Savvy business owners can strategize their spending across multiple personal and business cards, combining points or miles into one reward program. Just be mindful about opening too many credit cards at once since it can ding your credit score.
Flexible uses
Personal credit cards generally have no limitations on what you can purchase. You can freely swipe away, later highlighting which expenses you want to claim as business deductions.
In comparison, a business credit card is usually intended for business purposes only. Although it’s probably not a big deal to occasionally charge a small personal expense to your business credit, it technically goes against your user agreement. Continued misuse of a business credit card could result in the company closing your account.
Cons for using personal credit cards for business
Although using personal cards for business purposes can be attractive, it’s important to recognize the drawbacks.
Difficulty tracking business purchases
A significant disadvantage to using personal credit for your business is that it adds extra work when doing your small business tax preparation. Although it’s possible to scour your statements for eligible expenses, having a dedicated business card could trim tedious work hours or make your bookkeeper’s job easier. Plus, it looks better to have all business purchases on a dedicated business card in case of an IRS audit.
Furthermore, you can potentially deduct paid interest as a business expense, but only if it was on a business credit card for business purposes.
Most importantly, it’s advised to keep your business and personal expenses separate to help protect your personal liability if you own an LLC.
Personal cards are not ideal for multiple employees
A personal credit card is often enough to meet a small business owner’s needs, especially if you’re a solo entrepreneur or startup. However, if you want to distribute company cards to multiple employees, it’s probably best to go the business route.
With a business credit card, you can create an account manager to oversee all purchases, manage spending limits, freeze accounts and access all statements. Additionally, all the cards’ rewards pool together — which can go toward a company retreat, new equipment or holiday bonuses.
Personal cards don’t build business credit
Building your business credit is essential if you want access to more funds, such as an SBA loan. Lenders will often consider both scores — personal and business — and if one falls short, you could get denied.
Opening and maintaining a business credit card can help establish and strengthen your business credit score, opening the door for more options for small business loans.
Lower borrowing limits
In general, personal credit cards have lower limits than business credit cards. This is because lenders consider your business revenue, your personal income and overall creditworthiness on your business credit card application. You can access more funds with a business card if you have a high business revenue and a solid credit score.
You can also consider a high-limit personal credit card or a business line of credit if you need more borrowing power.
Missing out on exclusive business rewards
As already mentioned, both personal and business cards offer sign-up bonuses and rewards. However, business cards tend to focus on business-related expenses.
For example, the Ink Business Cash® Credit Card offers 5% cash back for purchases at office supply stores, internet, cable and phone expenses. Or the American Express® Business Gold Card allows you to pick two categories to earn 4x Membership Rewards, such as airfare, computer hardware, restaurants and more.
Rewards programs for personal and business cards
Some companies offer personal and business credit cards where you can pool rewards into the same reward program. If you’re debating over business credit vs. personal credit, you can’t switch from a business card to a personal card, but you can potentially transfer reward points before canceling a card. Or better yet, keep multiple cards open to maximize rewards.
| Rewards program | Personal card | Business card | ||
|---|---|---|---|---|
| Chase Ultimate Rewards | Chase Sapphire Preferred® Card | '- Earn 60,000 bonus points after you spend $4,000 on purchases in the first 3 months from account opening. That's $750 when you redeem through Chase Travel℠. - Enjoy benefits such as 5x on travel purchased through Chase Travel℠, 3x on dining, select streaming services and online groceries, 2x on all other travel purchases, 1x on all other purchases, $50 Annual Chase Travel Hotel Credit, plus more. | Ink Business Preferred® Credit Card | '- Earn 100,000 bonus points after you spend $8,000 on purchases in the first 3 months from account opening. - Earn 3 points per $1 on the first $150,000 spent in combined purchases on travel, shipping purchases, Internet, cable and phone services, advertising purchases made with social media sites and search engines each account anniversary year. Earn 1 point per $1 on all other purchases—with no limit to the amount you can earn. |
| American Express Membership Rewards | American Express® Gold Card | '- Earn 60,000 Membership Rewards® Points after you spend $6,000 on eligible purchases with your new Card within the first 6 months of Card Membership. - Earn 4X Membership Rewards® Points at Restaurants, plus takeout and delivery in the U.S., and earn 4X Membership Rewards® points at U.S. supermarkets (on up to $25,000 per calendar year in purchases, then 1X), and 3X Membership Rewards® points on flights booked directly with airlines or on amextravel.com. Terms apply. | American Express® Business Gold Card | '- Earn 70,000 Membership Rewards® points after you spend $10,000 on eligible purchases with the Business Gold Card within the first 3 months of Card Membership.* - Get 4X Membership Rewards® points on the 2 select categories where your business spent the most each month on the first $150,000 in combined purchases each calendar year (then 1X thereafter). Earn 3X Membership Rewards® points on flights and prepaid hotels booked on amextravel.com using your Business Gold Card. Earn up to $20 in statement credits monthly after you use the Business Gold Card for eligible U.S. purchases at FedEx, Grubhub, and Office Supply Stores. This can be an annual savings of up to $240. Enrollment required. |
| Capital One Miles | Capital One VentureOne Rewards Credit Card | '- Earn a bonus of 20,000 miles once you spend $500 on purchases within 3 months from account opening, equal to $200 in travel - 1.25 Miles per dollar on every purchase, every day; 5 Miles per dollar on hotels and rental cars booked through Capital One Travel | Capital One Spark Miles for Business | '- Earn a one-time bonus of 50,000 miles – equal to $500 in travel – once you spend $4,500 on purchases within the first 3 months from account opening. - 2 Miles per $1 on every purchase, everywhere - 5x on hotels and rental cars booked through Capital One Travel - $100 travel credit |
| Delta SkyMiles | Delta SkyMiles® Gold American Express Card | '- Earn 40,000 Bonus Miles after you spend $2,000 in purchases on your new Card in your first 6 months of Card Membership. - Earn 2X Miles on Delta purchases, at restaurants worldwide, plus takeout and delivery in the U.S., and at U.S. supermarkets. Earn 1X Mile on all other eligible purchases. | Delta SkyMiles® Gold Business American Express Card | '- Earn 55,000 Bonus Miles after spending $4,000 in purchases on your new Card in your first 6 months of Card Membership. - Earn 2 Miles on every dollar spent on eligible purchases made directly with Delta, on every dollar spent on eligible U.S. purchases for advertising in select media, on every dollar spent on eligible U.S. shipping purchases, on every eligible dollar spent on dining at restaurants. Earn 1 Mile on every eligible dollar spent on other purchases. - 1x on everything else - $100 flight credit after spending $10k |
| Wells Fargo Rewards | Wells Fargo Active Cash® Card | '- Earn a $200 cash rewards bonus after spending $500 in purchases in the first 3 months - Earn unlimited 2% cash rewards on purchases | Wells Fargo Business Platinum Credit Card | '- Earn a one-time $300 cash back bonus or 30,000 bonus points when you select a Business Card Rewards Program and spend $3,000 in the first three months of account open date. - Earn 1.5% cash back on qualifying purchases or earn 1 point on every $1 spend and receive 1,000 bonus points every billing cycle when you spend at least $1,000 on qualifying purchases. |
*Sign-up bonuses are issued after meeting the credit card’s minimum spending requirement.
The information related to the Chase Freedom Flex℠ and the Wells Fargo Business Platinum Credit Card has been independently collected by LendingTree and has not been reviewed or provided by the issuer of this card prior to publication.