Editor’s Note: This is a recurring post, regularly updated with new information.
One of the main reasons we recommend small business owner Have one business credit card is to separate business expenses from personal expenses.
Since business expenses are often tax deductible, keeping a wall between individuals and businesses will make that much easier during tax time — and even more so if the government moves forward. audit practice.
But everything happens. You pulled out the wrong card for a store purchase, or your business trip suddenly extends to include a short vacation and you’ve put the whole thing on your business card.
Here’s what you should know about putting personal expenses on business cards.
Is it illegal to put personal spending on a business credit card?
It is not illegal to use a business credit card for personal expenses. But that doesn’t mean it’s a good idea. Most credit card issuers do not allow small business owners to include personal expenses on a business credit card. If you do, you may be violating the terms of your card membership agreement. And that can have consequences.
What if you put personal expenses on a business credit card?
Aside from having to untangle spending on your business ledger, are there any other consequences? Correct. Your issuer may close your account if they see purchases that are clearly unrelated to your business. And if that happens, you could lose any points, miles, or cashback rewards you’ve saved.
While there is no evidence this is common, all major business credit card issuers say it’s a no-brainer to include personal spending on your business card. They even ask you to agree to include spending on their business card for business purposes only.
Here are some examples of this verbosity from common business cards:
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Business Platinum® Card from American Express — “Each Cardholder acknowledges and agrees that the card is used for commercial or business purposes by the Company.”
Capital One Spark Cash Plus — You “acknowledge and agree that all tokens will be used solely for business or commercial purposes and not for personal, family or household purposes.”
Ink . Business Preferred Credit Card — “I acknowledge, understand and agree that… this is a business account to be used for business purposes only and not for personal, family or household purposes.”
Related: Best Free Annual Business Credit Cards
A few years ago, Chase even put a note to some of his clients on his business cards, though it was more of a reminder than a threat:
Dear Chase Online Customers:
Thank you for using your Chase business credit card. Please continue to use it for business purchases, but keep in mind that it is not for personal use.
The business card regulations do not provide the level of protection afforded to consumer business cards. We want you to get the consumer protections you’re entitled to. So please use a consumer credit card to make purchases for individuals, families or households.
It’s important to note that it’s very difficult for a credit card issuer to know if a purchase you’re making is for personal or business reasons, which could be one of the reasons this rule is rare. when executed.
For example, was the dinner you just charged to your card a romantic date night or a business meeting? Is that the new laptop you bought for your personal use or for your business? Even tickets to concerts or sports matches can be entertained by customers.
Related: Do I need a business to get a business credit card?
Are there any benefits to putting your personal expenses on a business card?
Like TPG pointed out a few years agoOne reason why you might consider putting more than your business expenses on your business credit card is to support your personal credit score. For many – but not all — business cards only report to business credit bureaus, any spending with a business credit card will not affect your personal credit. This can help keep you low usage rate and your credit score is high.
But credit card business often have fewer consumer protections, along with higher interest rates and fees. Indeed, many of the consumer protections contained in the Credit Card Act of 2009 do not apply to business credit cards. The issuer voluntarily extended some protections, but bill introduced in the National Assembly 2018 will have:
- Prevent issuers from raising interest rates on small businesses without proper notice.
- Prohibited interest rate hikes on existing balances.
- Interest charges are prohibited for on-time payments.
- Claim any payments above the minimum that applies to the balance with the highest interest rate.
Unfortunately, that bill never had a vote.
if you pay off your balance in full and due on a monthly basis, these suggested protections won’t mean much to you because they’re focused on cardholders who tend to carry balances. It also means that there is little risk in putting at least part of your personal spending on a business card.
However, keep in mind that you may lose the other protections your business card provides if you use it for personal expenses. Chase, for example, offers main auto insurance when you rent a car for business purposes using Ink Business Preferred cardbut that coverage is downgraded when the rental is made for personal reasons:
In your country of residence, if you are renting for personal reasons, Auto Rental CDW is supplementary insurance, which means it supplements and applies beyond any valid and collectible insurance or compensation. refund from any source.
Related: Who qualifies for a business credit card?
bottom line
It may not be the best move to constantly set your personal spending business credit card. Although no harm is possible, there are risks associated with it.
Another thing to keep in mind: Mixing the two types of spending can negatively affect both your personal and business credit if you find yourself in financial trouble. However, if you accidentally put a personal expense on your business credit card, it won’t come back to bite you.
Additional reporting by Ryan Wilcox, Chris Dong and Robert Thorpe.
