Can you use a personal credit card for business expenses?

Technically speaking, you can use a personal credit card for business expenses, and many small business owners do. But that doesn’t necessarily mean you should.

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While there’s no law preventing you from using a personal card for business expenses, you lose the legal protections you’d get with a business credit card if your company runs into debt. You’ll also have a tough time separating your business and personal expenses when tax season hits.

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For those reasons, using a dedicated business credit card is a widely accepted best practice. Let’s get into a bit more detail about when and why you might use a personal card for business expenses, some of the risks involved, and the benefits of using a business credit card instead.

Reasons for using a personal credit card for business expenses

We get it: As a sole proprietor, small business owner, or startup entrepreneur, it’s convenient to use your personal card for business purchases like office supplies or travel expenses. There might even be times when it’s unavoidable.

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Like, for instance, when you’re out for a client dinner and you realize you forgot your corporate card. When it comes time to pay, you have to reach for your personal credit card instead of the card you’ve earmarked for business expenses. 

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Alternatively, there may be situations where you have both your personal and business credit cards on hand when paying for a business expense, but you find yourself allured by the miles or cashback you’ll earn by using your personal card—so you use that one instead. 

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Yet another scenario could be that you have no choice: You may have to use your personal card because you don’t qualify for a business credit card or line of credit.

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Risks of using a personal card for business

The main risk of using your personal credit card for business is that you have fewer legal protections should your business become insolvent. Using a personal consumer credit card for business opens entrepreneurs up to personal liability for business expenses, which can damage your personal credit score and even lead to legal action.

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One of the main reasons corporate structures exist is to protect your personal assets from possible business disputes, but you throw consumer protections out the window when you mix your personal and business finances together. That can have serious legal implications, which could lead to some unfortunate scenarios:

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• Your personal assets could be seized in a lawsuit against your business
• Family accounts and co-owned property like your home could be liable for seizure

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In addition to making yourself liable, mixing up your business and personal finances can potentially damage your business.

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Using a personal credit card for business purposes complicates your finances and confuses credit bureaus, creating room for bookkeeping errors and credit reporting disadvantages. This is especially true if you operate a nonprofit, which has its own unique tax and bookkeeping requirements. Using a separate business credit card for your nonprofit is highly recommended.

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All the reasons for using a business credit card over a personal card also apply to banking. Opening a dedicated business bank account and checking account that’s separate from your personal accounts is one of the first things you should do when you start your business.

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All the major banks and lenders offer business checking accounts, including Chase, Capital One, American Express, and Wells Fargo, but some are better suited to the needs of small businesses than others.

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Can employees use their personal cards for business expenses?

Employees can use their personal cards for business as well, but this often creates more problems than it solves.

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In many companies, employees can use their personal credit cards for business expenses and request reimbursement afterward. As long as the purchase qualifies as a valid business expense, and the company has a formal expense reimbursement process in place, this shouldn’t be too much of a hassle.

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But the process of filing and approving expense reports can be time-consuming, error-prone, and opens you up to the risk of expense fraud. On top of that, relying on employees to front your business expenses could impact morale if you can’t keep up with reimbursement requests and employees can’t pay off their balances.

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It’s more efficient for everyone involved to issue business expense cards with built-in spending limits and automatic receipt matching. Giving your employees corporate credit cards can help streamline expense tracking—not to mention the card perks and rewards you’ll get from employee spending that you’d otherwise miss out on if they used their personal cards.

Advantages of using a business credit card

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

1. ‍Builds 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.

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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.

2. Access to 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.

3. Rewards programs tailored to 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.

4. Free 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.

5. Spend tracking and expense management features

Finally, the best corporate card companies offer additional ways to help you save without incentivizing unnecessary spending. This could be through an expense management platform that analyzes your company’s spending in real time, automatically enforces your company’s expense policy, finds areas to cut costs so you can improve your budgeting, and boosts your bottom line.

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

While using a business credit card for personal expenses may not be illegal per se, it's generally not recommended due to the potential complications it can create.

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Specifically, charging personal items to your business credit card can violate the terms of the agreement you have with the credit card issuer. Violating these policies could lead to penalties, account closure, or other consequences.

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Also, mixing personal and business expenses in your credit card usage can complicate your accounting and tax reporting. As discussed above, it's best practice to keep personal and business expenses separate for tax purposes.

How to use Ramp’s corporate card for your business expenses

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 card solution, Ramp may be exactly what you’re looking for.

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Our corporate charge card comes packaged with a comprehensive set of expense management features that allow you to keep track of your finances in real time, along with a variety of handy budgeting and financial reporting tools.

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Ramp doesn’t incentivize spending—we just save you time and money. Watch our demo video to learn how our modern finance platform helps customers save an average of 5% a year.