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Can You Use a Business Credit Card for Personal Use?

mattlevy
Matthew Levy Updated: December 6, 2023 • 5 min read
swiping credit card at terminal

Key Points:

  • Business credit cards are made for business use and usually have helpful features for company needs.

  • They are designed to help companies with financial management, track expenses, and offer perks such as travel rewards or cash back on office supplies.

  • Examine the rules, risks, and best practices to help you understand mixing business with personal finances. 

Credit cards can be complex, especially when you have a business card and find out if you can use it for personal or business use. Below, we will examine the rules, risks, and best practices to help you understand mixing business with personal finances. 

Keeping personal and business expenses separate is generally advisable.

The Basics of Business Credit Cards

Business credit cards are made for business use and usually have helpful features for company needs. Business credit cards often have higher spending limits, provide detailed expense reports, and offer rewards for business expenses. They are designed to help companies with financial management, track expenses, and offer perks such as travel rewards or cash back on office supplies. Using a business credit card for personal use might be tempting, but it can have legal and financial implications.

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Potential Risks of Personal Use

Using a business credit card for personal expenses is convenient, but risks are involved:

  • Risk of Mixing Financial Lines: Using a business credit card for personal costs leads to more complex tax situations.
  • Potential for Audit Complications: Because of unclear financial records, mixing personal and business expenses might trigger tax auditing problems.
  • Difficulty in Tracking Business Growth: Personal expenses on a business card can confuse your business's financial overview, making budget management and growth tracking difficult.
  • Violation of Card Agreement: Personal use of a business credit card violates the card agreement's terms, which may lead to the account's closure or penalties from the issuer.
  • Importance of Maintaining Boundaries: Keeping personal and business expenses separate is essential to ensure financial clarity and legal compliance. Try to avoid using a business credit card for personal needs.

Legal Implications

Is it illegal to use a business credit card for personal use? Using a business credit card for personal expenses isn't a good idea. It’s not explicitly illegal, but it often violates the terms of your credit card agreement.

Charging personal expenses for business purposes can be seen as misrepresentation or fraud. This is especially true if these expenses are later claimed as business deductions for tax purposes. You should consult a financial expert to understand the full legal implications if you do this in practice. 


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Impact on Credit Scores and Taxes

Personal use of a business credit card can impact your credit score and taxes.

For your Credit Score:

  • It can lead to inaccuracies in your business credit history.
  • It can increase business costs, affecting your personal and business credit score, especially if personal expenses are high.

For your Tax Obligations and Filings:

  • Misusing a business credit card complicates tax filings.
  • Mislabeling personal expenses as business ones can result in incorrect business tax deductions.
  • Such practices can attract unwanted attention from tax authorities.

For your Credit Report Considerations:

  • Business credit card issuers report mixed usage, which might negatively impact your credit report, mainly with high credit use or missed payments.

The best practice is to separate business and personal finances to maintain healthy credit scores and accurate tax records.

Alternatives to Using Business Cards for Personal Use

There are alternatives to using a business credit card for personal use that you should explore, like: 

  • Get a different credit card just for personal expenses. This will help set clear financial separation from the business purchases. 
  • You can avoid using business credit by having an emergency fund for unexpected expenses. 
  • Using personal savings or a personal line of credit can help keep personal purchases and business finances separate. 

You can use many alternatives, but the most important is to keep things separate from personal and business expenses.

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What Happens if You Put Personal Expenses on a Business Credit Card?

Using a business credit card for personal expenses can lead to several consequences and complications, both for the individual and the business. Here are some of the key issues that can arise:

  • Tax Complications: Business expenses are often tax-deductible, but personal expenses are not. Mixing the two can create complications when it's time to file taxes. It can be challenging to separate personal and business expenses if they're all on the same card, potentially leading to errors in tax filings.
  • Legal and Compliance Issues: For corporations and LLCs, there's a legal distinction between the business's finances and the personal finances of the owners. Using a business credit card for personal expenses can blur this line, potentially jeopardizing the legal protections that separate the individual's assets from the business's liabilities.
  • Credit Implications: If personal expenses lead to high balances on the business credit card, it could affect the business's credit rating. This can make it harder for the business to get loans or other lines of credit in the future.
  • Reimbursement Issues: If you're an employee using a company card, using it for personal expenses can be seen as misuse or fraud, depending on company policies. This can lead to disciplinary actions or even job termination.
  • Accounting Challenges: Mixing personal and business expenses complicates accounting. It can make it harder to track business spending, budget effectively, and understand financial health.
  • Breach of Card Agreement: Many business credit card agreements explicitly prohibit using the card for personal expenses. Violating this agreement can lead to penalties, cancellation of the card, or other contractual consequences.
  • Impact on Business Relationships: If other stakeholders in the business (like partners or investors) discover the misuse of business credit for personal expenses, it can lead to a loss of trust and potential conflicts within the business.

For these reasons, keeping personal and business expenses separate is generally advisable.

Best Practices for Business Card Use

When it comes to using business credit cards, the first step is adhering to best practices, a few of which are listed below:

  • Company credit cards should be reserved strictly for business spending. This clear separation prevents any confusion during financial reporting or tax filing. 
  • Check credit card statements often to find accidental personal expenses on business credit cards. 
  • Have a company policy for using business credit cards. This is especially important if multiple employees can use them. 
  • Use your finances responsibly to protect the company's finances, so you won’t need to mix business and personal credit card use.
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FAQ

Can I use my personal credit card for business expenses?

Yes, you can use your personal credit card for business expenses, but it's not recommended. Mixing personal and business finances can complicate accounting, tax filing, and maintaining clear financial records for your business. It's better to use a separate business credit card for business-related expenses.

What are the consequences of using a business credit card for personal expenses?

If you use a business credit card for personal expenses, your finances can get complicated. This can create tax problems and even legal trouble. It may also breach the card's terms of service and could result in penalties from both the credit card issuer and tax authorities.

Can small business owners use their business cards for occasional personal needs?

While technically possible, it's not advisable for small business owners to use a business credit card for personal use. Can you put personal expenses on business credit cards? However, doing this can complicate accounting, taxes, and card agreements.

What are some tips for keeping business and personal expenses separate?

Use distinct credit cards for each purpose to keep business and personal expenses separate. Review statements often to make sure expenses are categorized correctly and fix any mistakes right away.

How can misuse of a business credit card impact tax filings and credit scores?

Using a business credit card wrong can make your tax filings wrong.If personal expenses cause overspending or missed payments, it can affect the business's credit score. This may impact future creditworthiness and loan eligibility.

What if I accidentally use my business credit card for personal expenses?

If you accidentally use your business credit card for personal expenses, you should reimburse the company as soon as possible for the amount of the personal expense. Document the transaction and inform your company's accounting or finance department about the mistake to ensure proper accounting and maintain transparency.

mattlevy
Written by Matthew Levy

Matthew is a freelance financial copywriter with 14+ years in financial services. He holds a Bachelor of Science degree in Economics with business and finance options and is a CFA Charterholder. He is from Vancouver, Canada, but writes from all over the world.