What can you use a business credit card for?

A business credit card is a valuable tool for managing cash flow, simplifying transactions and supporting business growth. However, it’s important to understand precisely what you can – or can’t – use a business credit card for. 

At a glance

• Business credit cards provide a flexible way to borrow funds to pay for corporate expenses

• You can use your business credit card to pay for office supplies, marketing costs, inventory, utility bills, travel costs and more

• You should avoid using a business credit card for personal expenses, as well as staff salaries and other large purchases

• Business credit card purchases have no protection under Section 75 of the Consumer Credit Act 

What is a business credit card?

A business credit card is a flexible payment card that you, as a business, can use to manage expenses. 

It works in a similar way to a personal credit card – you can borrow up to your pre-agreed credit limit and then make flexible monthly repayments. But many business credit cards also offer benefits tailored towards companies, such as additional cards for employees and travel perks.

What can you buy with your business credit card? 

You can use a business credit card for a variety of purposes, including paying for:

• Office supplies and equipment: This can include everything from pens and paper to printer ink, printers and laptops. You can also use your business credit card to pay for ergonomic chairs and desks for the office, and any other equipment you might need

• Utilities and bills: You can use your business credit card to pay for internet and phone services, business energy bills, software subscriptions and other recurring expenses 

• Travel and entertainment costs: If you need to travel to business meetings or conferences, you can use your business credit card to pay for train fares, flights and hotel stays. You can also use it to cover the cost of meals out if you’re entertaining clients 

• Inventory and shipping costs: A business credit card can help spread the cost of goods or materials needed to produce your products or run your service. You can also use it to pay for courier services, postal charges and logistics

• Marketing and advertising costs: Whether you’re paying for online ads, promotional materials, website services or graphic design, you can cover the cost with your business credit card

What should you not use your business credit card for? 

It’s important to understand what you shouldn’t use your business credit card for. Key examples include:

• Personal spending: Although it’s not illegal, using your business credit card for personal expenses is strongly discouraged. It can complicate your accounting, blur the lines between personal and business finances, and make it harder to claim tax deductions or provide accurate records if you're audited. So, avoid using it to pay for your supermarket shop on the way home from work or your taxi fare on a night out

• Staff salaries: As staff salaries are one of your biggest outgoings, it’s not advisable to use your business credit card to cover these costs. Doing so can result in high interest charges and growing debt, which may put your business’s financial stability at risk  

• Large, expensive purchases: It’s best to avoid using a business credit card for large purchases, such as machinery, because the debt can take time to repay and interest can add up quickly. Instead, consider options such as business loans or asset finance, which often offer lower interest rates and more manageable repayment terms

• Tax bills: Although it’s possible to pay your business tax bill with a business credit card, fees usually apply, making it less cost-effective

• Gambling or high-risk transactions: Credit card providers typically prohibit these types of transactions and could close your account if you ignore the rules

• Cash withdrawals: Withdrawing cash on a credit card typically incurs a fee, and interest applies to the transaction from the day of the withdrawal, even if you pay off the balance in full that month. This makes it a very expensive option, so is best avoided

Why shouldn’t you use your business credit card for personal expenses?

Using your business credit card for personal spending can blur the lines between your personal and business spending, making it much harder to monitor business finances and complete your tax return accurately. 

Moreover, some business credit card agreements explicitly state you should use your business credit card for business expenses only. If you ignore this, your card provider may have the right to close your account. 

Also, keep in mind that Section 75 of the Consumer Credit Act doesn’t cover purchases on a business credit card. This only applies to personal credit cards and covers purchases of more than £100 and up to £30,000, allowing you to make a claim if something goes wrong.

What if you accidentally use a business credit card for personal expenses? 

If you accidentally use your business credit card for personal spending, don’t panic. Instead, flag the purchase as a personal expense so you can exclude it from your calculations when completing your tax return. 

It’s also wise to pay off the purchase from your personal funds as soon as possible.

Can you use your personal credit card for business expenses? 

Again, it is possible to use a personal credit card for business expenses, but it’s best avoided. 

Not only can it make it more difficult to distinguish between your personal and business finances, you might also miss out on perks and rewards that could benefit your business, such as additional employee cards, travel insurance or air miles. 

What’s more, using a personal credit card means you don’t build up a business credit score. This is less important for sole traders because there’s no legal distinction between the individual and the business. But for other types of business, building business credit can give you access to other finance deals in the future.

Read more …

• What is a business credit card?

• How to choose a business credit card

• Can you use a personal credit card for business?

• Should you get a business credit card or business loan?