Can you use a business credit card for personal use?

It's generally not a good idea to use a business credit card for personal expenses, even though it's not against the law. If you do, it could go against the terms and conditions you agreed to when you got the card.

If you accidentally make a personal purchase using your small business credit card, the best option is to pay it off as soon as possible to avoid any penalties.

In this article we’ll outline what you should know about putting personal expenses on your business credit card.

‍Is it illegal to use a business credit card for personal expenses?

It isn’t illegal to use a business credit card for personal expenses, but it may violate your card’s terms and conditions. Violating these policies can lead to penalties or the closure of your account. If you’re unsure whether you can use your business credit card for personal use, check your card issuer’s website and find the card agreement associated with your credit card.

What happens if you put personal expenses on a business credit card?

If you accidentally use your business card for a personal expense here and there, it’s unlikely that anything will happen. However, if you do it regularly then your credit card issuer may start to notice that a large amount of your transactions are not business-related. If that happens, you might lose rewards you earned or even have your account closed.

It’s unlikely that your card would be revoked, but since all of the major business credit card companies have cardholders agree to use the card for business expenses, it’s best to stick to those terms.

You may face penalties or account closure

Many business credit card issuers explicitly state that they are for business purposes only. For example, American Express notes in its Business Card Member Agreement: “You agree to use the Account only for business, commercial or organizational purposes, and not for personal, family or household purposes.” Using the card for personal expenses is a violation of these terms, which could lead to penalties such as account suspension or cancellation.

Chase also outlines similar consequences. In its Business Credit Card Agreement, Chase states that it may “require you to immediately pay your balance in full” if you fail to comply with the card’s intended business use. These penalties can disrupt your business operations by limiting your access to credit when you need it most.

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Tax filing will become more complicated

When you mix personal and business expenses, sorting out deductible business expenses can become difficult during tax season. This increases the risk of errors and raises the chances of an IRS audit.

If you're audited, having personal charges on a business card complicates the process and may prompt closer scrutiny. Maintaining clean, separate records is the best way to avoid these complications.

You may lose liability protections

If you operate as an LLC or corporation, your personal assets are usually protected from business liabilities. But using a business credit card for personal purchases could blur the line between your personal and business finances, potentially putting those protections at risk.

This scenario, often referred to as "piercing the corporate veil," can make you personally liable for business debts if creditors argue that you've commingled personal and business funds.

Expenses will become difficult to track

Mixing personal and business expenses on a single credit card complicates financial management. It skews your company’s financial records, making it difficult to track your true business spending.

To maintain clear records and simplify tracking:

• Use separate credit cards for personal and business expenses.
• Review business statements regularly for accuracy.
• Implement accounting tools to categorize your business expenditures efficiently.

Both your business and personal credit scores may suffer

Personal expenses on a business credit card can harm not only your business credit score but also your personal credit score. High credit utilization from personal charges can make it appear as though your business is overextended, leading to a drop in your business credit score. This can make it harder to secure favorable financing terms for your business.

In addition, if your business card requires a personal guarantee, missed payments or carrying large balances on personal purchases could negatively impact both your business credit report and your personal credit. This dual impact can create challenges in obtaining financing in the future.

You may lose consumer protections

Business credit cards do not offer the same consumer protections as personal credit cards. For instance, the Credit CARD Act of 2009 applies only to personal credit cards and provides protections such as caps on late fees and requirements for clear billing statements. If you use a business card for personal expenses, you forgo these protections.

This means if you face issues such as billing disputes, higher interest rates, or unexpected fees, your business card issuer is not obligated to follow the same consumer-friendly regulations. In contrast, personal credit cards offer more robust protections that can shield you from unfair practices.

Why you might want a business credit card

As a small business owner or sole proprietor, there are many reasons to use a business credit card.

In addition to stronger legal protections and a clearer separation of your business and personal finances, there are many advantages to using a business credit card.

To build business credit

From small, everyday business purchases to large-scale loans, your business needs credit to function. One of the primary ways to demonstrate creditworthiness is to keep your business credit history and your credit score strong. One of the best ways to build your business credit score (especially as a new business) is by using a dedicated business credit card.

Building business credit over time allows your business to access better interest rates and terms on any loans you may need to take out. You won't be building business credit if you use a personal credit card for business expenses, which you might regret if you ever need to take out a business loan for equipment, real estate, or other larger business expenses.

To access higher credit limits

Running a business can be expensive, so having a line of credit to help cover costs is essential. The best business credit cards are purpose-built for the demands of running a business, including higher credit limits than personal credit cards. Data shows the average business credit card limit is $56,100, more than $25,000 higher than the average personal credit card limit.

To earn rewards on business spending

Business credit cards tend to optimize their rewards programs for common business purchases like fuel, office supplies, and travel costs. That means you’ll stand to get more points, miles, or cashback on eligible purchases than you would with a personal credit card. Additionally, some cards let you tailor your rewards program by selecting your own bonus categories.

To order employee cards

Many of the most attractive consumer credit cards make you pay a fee for additional cards or authorized users. In contrast, business credit cards typically offer unlimited employee credit cards for free, plus additional features like customizable spend limits and employee expense monitoring. The best corporate cards offer unlimited virtual cards as well.

To use expense management features

Business credit cards come with powerful expense management features that help streamline company spending. As a business owner, this allows you to track expenses in real time, categorize transactions, and set spending limits for employees. You can manage cash flow, maintain control over budgets, and generate detailed expense reports, providing a level of oversight that’s especially useful for growing businesses.

Manage spending with Ramp’s business credit card

We’ve established that it’s not a good idea to go around charging business expenses to your personal credit card, and that it’s better to use a business credit card instead. If you’re in the market for an all-in-one corporate business credit card, Ramp may be exactly what you’re looking for.

The Ramp Card comes with a comprehensive set of expense management features to track finances and provides budgeting and reporting tools. With no credit check or personal guarantee, you can qualify with a registered business and $25,000 in a U.S. business bank account.

Watch our demo video to learn how our modern finance platform helps customers save an average of 5% a year.