But is it smart to use a personal card for business expenses? There are both benefits and drawbacks to using a personal card for business expenses. If you plan to use a personal card, the best way to keep your personal and business finances separate is to dedicate that personal credit card to business transactions only to make tracking easier. Consider the pros and cons of using a personal card for business expenses before your next shopping trip.
Business cards are not subject to the Credit CARD Act and usually have higher fees and interest rates, since both are deductible business expenses. If you want the CARD Act protections, you can use a personal card for business expenses, but keep this card for those expenses only. If your business defaults or fails and still has debts, your commingled funds could allow the debtor to go after your personal assets to satisfy the debt. This is what it means to “pierce the corporate veil.” If you use a personal card for business expenses, you won’t be able to get employee cards. You can add them as an authorized user, but you can’t separate the transactions and you are personally responsible for all purchases, whether or not you authorized them. By keeping your personal and business expenses separate, you can control spending limits easier on both accounts. Plus, if you need to make a large business purchase, you don’t have to worry that you won’t have enough credit to pay for a smaller personal expense. Being responsible with your business credit card can help you build business credit, which can boost your spending power down the road.
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Business credit cards also usually offer higher percentage award categories for common business expenses, like utilities, online advertising, and office supply stores. If you meet the minimum spend requirement for the Chase Ink Business Cash Card, for example, you get a $750 cash back bonus after spending $6,000 in the first 3 months. With Chase’s personal credit cards, the sign-up bonus is only $200.
A late payment won’t affect your personal credit.If you have a high balance on a business credit card, your credit utilization ratio won’t be affected.Your business credit cards won’t factor into approval for personal credit cards and loans.If you are applying for a personal loan, your business card balance won’t affect your debt-to-income ratio.
If you personally guarantee the business credit card using your social security number, the bank may report late payments or charge-offs. And while many business credit cards don’t report to the credit bureaus, some do, so it may be worth it to find out before applying.
