May 1, 2023

Can I use a personal credit card for business expenses?

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Yes. Technically speaking, you can use a personal credit card for business expenses. 

However, that doesn’t mean that you should. 

The practice puts your personal credit score and assets at risk if your business runs into debt. Putting businesses expenses on your personal credit card also makes it hard to track business expenses when tax season rolls around.

Using a personal credit card for business: pros and cons

For your own business, it may be convenient to use your personal card for business purposes (like office supplies). However, filing small business taxes can be a nightmare if you have to manually track business vs. personal expenses. Unless you make the separation clear, your personal finances may also end up taking a hit when your business does.

Reasons for using a personal card

We get it, sometimes it's more of a hassle to dig out your business credit card for business purchases.

You may have corporate credit options, but not have them readily available. or example, you forget to bring a corporate card to an event or client dinner.

Or perhaps you may have rewards or other benefits that incentivize the use of your personal credit card. For example, it may be offering better cashback, discounts, or rewards than what your corporate card is offering.

Last but not least, you simply may not have a choice because you don't qualify for a corporate credit card or line of credit.

The risks of using a personal card

However, using a personal card for business can lead to serious problems for both your business and your personal finances.

Using a personal card for business opens founders and small business leaders up to personal liability for business expenses, which can damage your personal credit score and even lead to legal action. One of the main reasons corporate structures exist is to protect your personal assets from possible business disputes, but you throw consumer protection out the window when you mix your finances together.

That means a) your personal assets could be seized in a lawsuit targeting your business and b) family accounts and co-owned property (your house) could also be liable.

In addition to making yourself liable, mixing up your business and personal finances can also damage the business itself. Using a personal credit card for business expenses complicates finances and confuses credit bureaus, creating room for potential bookkeeping errors and credit reporting disadvantages, especially as you scale up your business.

(This is especially true if you operate a nonprofit, which have their own unique tax and bookkeeping requirements. It's highly recommended to use a separate business credit card for your nonprofit.)

Can you use a personal credit card for business?

You now understand why it's often a bad idea for you to use your personal credit card for business—what about your employees? 

In many companies, employees are able to use their personal cards for business expenses, then file for reimbursement afterward. As long as the use is authorized and there’s a simple expense reimbursement process established, this shouldn’t be a problem.

But having to front corporate expenses with personal finances and then file expense report paperwork afterward can cause frustration for employees and waste your accounting team’s valuable time and resources. Put simply, relying on your employees to use a personal card for business expenses isn’t fair to your team. 

When employees use personal cards and are later reimbursed, the employees’ credit lines function like de facto business loans. This can create a strange dynamic where the employees act as a bank, loaning personal money to the company. While that’s not necessarily a negative impact on either the company or employee, it’s certainly not optimal.

It’s much better to empower employees by giving them a company credit card with built-in spend limits and automatic receipt matching.

What to use instead: Advantages of using a business credit card

To avoid jeopardizing your financial well-being, you need a corporate card with no personal liability. 

But what does that mean? 

Personal liability (also known as a personal guarantee) is a requirement for some business credit card issuers; it makes the key business owners personally responsible for debts incurred in the name of the business. This form of collateral helps reduce the risk taken on by the creditor, and it's why a business credit card may affect personal credit. But it can also create problems for the cardholder.

These days, there are better, more founder-friendly small business credit cards and corporate cards on the market.

There are various types of business credit to choose from, and each has its own pros and cons. However, all share a handful of advantages that make them a better alternative to using personal credit cards:

Build business credit

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

Improved security

Because of the Federal Trade Commission’s Credit Card Accountability Responsibility and Disclosure Act of 2009, security measures protect business credit cards. While the measures set out in the CARD Act apply specifically to personal cards, a majority of corporate cards are also bound by them. Plus, legislation to increase corporate cards’ protections is in the works.

Low costs

Many business credit card companies have fees associated with registration and yearly renewal. But some credit cards have no annual fees (or interest rates) and operate at low or no cost to you.

Cashback incentives

Some corporate cards help you find value by incentivizing business spending with cashback rewards programs up to a certain limit. These programs allow you to redeem business cash rewards when you make certain eligible purchases (often from predetermined bonus categories).

Partnered promotions

Financial institutions typically partner with a number of goods and services retailers, offering special intro APR and other rates, free employee cards, bonus points and credits, and other discounts.

Spend management platform

Finally, the best of the best corporate card companies offer additional ways to help you save, without incentivizing spending. This could be through an expense management platform and a suite of tools that analyzes your company’s spending in real time and finds areas to cut costs, reduce maverick spend, and boost your bottom line.

At Ramp, our benefits for business owners and accounting teams make our corporate card better than other credit cards on the market.

Solve your business credit troubles with Ramp

Instead of asking, “can I use a personal credit card for business?” it’s time to start looking for the perfect business card to meet your company’s individual needs and means. 

Submitting an application for Ramp’s corporate card platform takes as little as five minutes, and you’ll find out if you’re approved in no time! Get started with Ramp today. The personal and business benefits are immeasurable.


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