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Can I use a personal credit card for my business?
There’s no law against using a personal credit card for your business, but there are lots of reasons to use a business credit card instead.
It is possible to put business expenses on a personal credit card. However, using a personal credit card for your business is not always a smart idea. In this short guide, we explain why.
At a glance
You can use a personal credit card for business costs, but it can make bookkeeping, tax records and expense tracking harder
A business credit card gives you a clearer way to separate business and personal spending
Mixing personal and business costs can cause problems if you need to prove expenses to HMRC, manage cash flow or apply for business finance later
Can you use a personal credit card for business expenses?
Yes, you can use a personal credit card for business transactions. As long as the payment works, it makes no difference to the individual or company receiving the money. However, there are plenty of reasons why a business credit card is a much better option.
First, business credit cards typically offer higher credit limits. Second, they make it much easier to separate personal and business expenses, which is vital for good bookkeeping and tax reporting.
From a legal point of view, sole traders can use personal accounts and credit cards for business, although separating finances is still best practice.
Directors of limited companies, however, are legally required to keep business and personal finances separate – including opening a business bank account.
While the rules around credit cards are slightly less clear-cut, using a business credit card helps maintain that separation and may offer better legal protection. This is especially important if a limited company goes into liquidation, for example, as clearly separated finances can reduce the risk of personal liability.
So, whether you’re a sole trader or run a limited company, using a business credit card for company expenditures is a wise move.
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What are the similarities between personal and business credit cards?
There are lots of similarities between business and personal credit cards.
Both types of cards give you:
The possibility to borrow money up to a certain amount
The ability to pay your balance off - in part or in full - at any time
The chance to buy items and services and to spread the cost of big purchases when necessary
The option to earn rewards or other benefits on your spending
In return, card providers expect to earn interest on any balance you don’t clear at the end of the month. This is on top of other fees such as foreign currency commission and penalty charges if you exceed your credit limit or fail to make a monthly payment on time.
What are the main differences between personal and business credit cards?
There are plenty of significant differences between personal and business credit cards, including:
Interest rates: Business credit cards often charge interest at a higher rate than personal cards, although some offer 0% deals on purchases for a set period
Consumer protection: Section 75 of the Consumer Credit Act does not cover business credit cards, although some providers offer purchase insurance that provides similar benefits
Credit scores: Good management of your business credit card can help you build up your business credit score, whereas your personal card can only impact your personal score
Credit limits: You can often borrow more with a business credit card than with a personal one, and your balance won’t affect your personal debt level
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Why should you use a business credit card?
There are several reasons to use a business credit card rather than a personal one when making transactions for your business:
Accounting
Separating your business and personal expenses makes it much easier to manage your business accounts, especially when it comes to tax.
You can also give employees business credit cards to use for their expenses. This makes it easier to track spending and does away with the need for time-consuming expense forms and reimbursements
Credit ratings
You can’t use a personal credit card to build up your business’s credit history. On the other hand, using a personal card for your business can damage your personal credit score.
However, building up a large balance on a business credit card doesn't affect your personal credit utilisation ratio
Rewards and perks
Business credit cards often come with perks designed for small business owners. These could be anything from preferential rates for overseas spending to discounts on office supplies
Higher credit limits
Business credit cards generally have higher interest rates than standard credit cards of a similar type. However, they also offer more generous borrowing limits than personal credit cards, as companies often need to make outlay more than individuals
While standard personal credit card agreements generally allow you to use the card for business spending, putting personal expenses on a business credit card may violate your card issuer’s terms.
How to manage a personal card for business expenses
If you choose to use a personal credit card for your business, it’s important to manage it carefully.
That means applying the same disciplined approach you'd use for personal spending – tracking expenses, staying within limits, and paying off the balance on time.
Stay on top of repayments: Paying off your balance in full each month helps you avoid interest charges and keeps your credit score healthy.
Track your spending: Keep clear records so you can separate business and personal expenses. This will make accounting and tax returns much easier.
Use your rewards: Don’t forget to take advantage of any perks your card offers, from cashback to air miles.
You can find out more about the full range of financial tools available to help you run your businesses via our dedicated business comparison service.
FAQs
Can I claim business expenses paid on a personal credit card?
Yes, you can usually claim allowable business expenses paid on a personal credit card, as long as the cost relates wholly and exclusively to your business. This can be harder to spot and prove if it's amongst a sea of personal transactions though.
Be sure to keep clear receipts and records so you can show what each payment was for.
Does using a personal credit card affect my business credit score?
Using a personal credit card will not usually help you build your business credit score, because the borrowing sits in your name rather than the business’s name. It may affect your personal credit score though, especially if you carry a high balance or miss payments.
Should I switch to a business credit card later?
It may make sense to switch once your business starts to grow, you want to build your business credit score or if you need clearer expense tracking.
A business credit card can also make life easier if you need extra cards for employees or want business-focused spending tools too - so check out the features so you can make the switch at a time that's right for you.