Can I use a personal credit card for my business?

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. Here’s why.

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. 

Read more:

• What is a business credit card?

• How to choose a business credit card
  

What are the main differences 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.

However, there are also some 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
  

Read more:

• Business credit card or business loan?

• How to apply for a business credit card

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’ 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 does not 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.

Read more…

• What is a business credit card?

• How to choose a business credit card

• How to apply for a business credit card

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