Can you use a business credit card for personal use?

You can legally use a business credit card for personal expenses, but it may violate your card’s terms and conditions. On top of that, it isn’t the best idea to mix your business and personal expenses on one card.

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Making personal purchases on your business card can make it hard to track your business expenses, causing problems come tax season. In this article we’ll explain the reasons you might use your business credit card for personal use and why you should avoid it.

Reasons you might use a business credit card for personal expenses

Convenience is the main reason small business owners report using their business credit card for personal expenses. If you have both personal and business purchases to make throughout your day, using one card might seem like the easiest option.

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The second reason you might be tempted to use your business credit card is for the rewards and benefits. Business cards often offer attractive perks, like universal cashback or travel rewards. By putting your personal expenses on your card, you may be able to rack up more points or cashback than you would on your consumer credit card.

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However, the advantages of using a business credit card for personal expenses don’t outweigh all of the drawbacks and risks. In the next section, we’ll explore why you should stick to a consumer credit card for personal use and keep your business spending separate.

Risks of using a business credit card for personal use

There are no laws against using a business credit card for personal use, but doing so carries some severe risks. Here are some of the possible consequences:

Your credit card may be canceled

Putting personal expenses on your business credit card is likely prohibited in the cardholder agreement you sign when you open your account. While most issuers allow incidental personal use, excessive or intentional personal use could lead to your credit card being canceled.

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For example, the terms for the Capital One business card state, "Acknowledge and agree that all cards and convenience checks will be used solely for business or commercial purposes and not for personal, family, or household purposes".

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The cardholder agreement for the Chase Visa Business Card also states, "By becoming a Visa Business Card cardmember, 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".

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If your credit card provider notices that your transactions aren’t business-related expenses, this could raise an alarm. If you break your cardholder agreement by using your business credit card for personal expenses, this gives the issuer the right to close your account.

Your personal liability increases

When you use a business credit card for personal expenses, it can lead to personal liability issues. Credit card providers usually ask you to sign a personal guarantee in the application process, which makes you as an individual responsible for paying down any debts incurred by your business.

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When you charge large personal expenses to your business credit card, you blur the line between your personal and business finances. If you should run into credit card debt, you’ll be personally liable for your business credit card’s balance, including any non-business charges.

You lose consumer protections

Personal or consumer credit cards are subject to the Credit Card Accountability Responsibility and Disclosure Act (CARD Act), which provides important protections to cardholders. Business credit card users, however, are ’t subject to these protections, which include:

• Restrictions against sudden interest rate increases
• Restrictions on interest rate increases on existing balances
• Restrictions on over-limit fees

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If you have to file a dispute on your business credit card. For that reason, it’s preferable to use a personal credit card to ensure that any personal purchases are safeguarded by the CARD Act.

You won’t build your personal credit score

Business credit reports report to the business credit bureaus, like Equifax and Dun & Bradstreet. With that in mind, any personal transactions that you make on your business credit card will factor into your business credit score. This means you’ll be losing out on building your personal credit score by making purchases and timely payments on your consumer card.

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Additionally, if you can’t pay off your business credit card, your personal credit score may be negatively affected. This is because if you become unable to pay down your business credit card, you’ll be held personally liable for that debt, which will show up on your personal credit report.

Your taxes will become more complex

One of the reasons to use a business credit card is to keep track of all your business expenses in one place. Some cards, like corporate credit cards, even provide automated expense categorization and reporting features that make it easy to account for all of your business purchases come tax season.

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When you use your business credit card for personal use, you’ll have to separate out the non-business expenses which aren’t tax-deductable. Just by looking at your credit card statement, it can be hard to tell these transactions apart. Plus, if you end up being audited by the IRS, you may end up having to pay taxes or fines for incorrectly reported expenses.

Can you use a personal credit card for business?

Yes, you can use a personal credit card for business expenses. This situation likely won’t violate any cardholder agreements, and you’ll be protected by the CARD Act when you use a consumer card. If you’re a freelancer or sole proprietor, it may make sense to use one credit card and separate out your business expenses for tax deductions.

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Employees also often use their personal cards for company expenses, like business trips, then file for reimbursement afterwards. As long as the use is authorized and a simple expense reimbursement process is established, this isn’t a problem.

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However, having employees use their personal finances and then file expense report paperwork afterward can cause frustration and waste your accounting team’s time. When employees use their personal cards, their credit lines function as de facto business loans for your company—which isn’t the optimal situation.

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Instead, you might want to consider giving your employees company credit cards with spending limits and receipt matching to eliminate the need for reimbursement programs.

Solve your business credit troubles with Ramp

If you’re looking for a business credit card, consider Ramp. We offer both virtual and physical corporate cards, so you can always easily access the right card for your business expenses. Plus, our platform has built-in expense management features like automatic expense categorization and reporting, making things simple come tax time.

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Ramp has no credit check and no annual fees, and submitting an application takes as little as five minutes. With our sales-based underwriting, you may even be eligible for a higher credit limit than with a traditional credit card.

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Read more about how Ramp’s business cards can streamline your business expenses and increase your bottom line.