Business credit cards are an excellent way for small business owners to earn rewards, get instant financing, and keep track of their business purchases. And they’re versatile; you can qualify for a business card whether you’re a sole proprietor, a freelancer, or a brick-and-mortar store owner.
With the great rewards and benefits these cards offer, it can be tempting to use your business rewards card for all expenses, including non-business purchases. But there are a few reasons why that’s not a great idea.
While there is no law preventing you from putting personal purchases on your business credit, it is best to keep them separate. Here’s a closer look at the risks of using your business credit card for personal spending:
It is possible to use your business credit card for personal expenses, as long as your card is an accepted form of payment with the merchant. And it can happen: Maybe you’re not sure whether an expense actually counts as business spending or maybe you simply pull out your business credit card by accident at the register.
But that doesn’t mean you should regularly use your card for non-business purchases.
Using a business card for personal expenses is likely to violate your cardmember agreement. Many issuers specify within the terms of their business credit cards that these cards should be used for business purposes only.
For example, the card agreement for the Blue Business® Plus Credit Card from American Express states that by applying, “you … are representing that all cards issued on the account will only be used for commercial or business purposes.”
You’ll find a similar statement from the Bank of America® Business Advantage Unlimited Cash Rewards Mastercard® credit card. Among other terms, by submitting an application, you “acknowledge and agree on behalf of the business entity and [yourself] as the owner/authorized officer … that the accounts will be used for business purposes only.”
If your issuer finds you in violation of your card’s terms — including using your business card for personal expenses — you could face consequences like having your account closed by the credit card company.
Business credit cards and taxes
Another thing to consider if you charge personal expenses to a business credit card is how that may complicate your tax return come tax season.
You should not try to deduct personal expenses you make with a business credit card from your taxes.
One of the biggest benefits of using a business credit card as a business owner is the ability to separate your business spending from personal expenses. Combining business and personal purchases on one credit card can make it challenging to determine which are tax deductible and which are not. It’s always smart to speak with a tax professional if you’re unsure how to account for your business expenses come tax season.
If you’re a small business owner, there are plenty of reasons to consider opening a credit card for your business expenses. While it’s not wise to use this type of card for your own personal spending, you’ll get ample benefits when you use a business credit card for your business expenses.
These may include flexible financing, options for employee purchases, and savings on your regular spending. For business travelers, co-branded credit cards from airlines and hotels typically offer additional perks and elite status when making business travel reservations.
Here’s a closer look to help you decide if a business credit card is right for your company spending:
Keep business and personal expenses separate
Keeping track of business expenses is an important part of your company’s accounting. This allows you to understand the profitability of your company, and you can assign costs to projects or clients to make better business decisions. By having a dedicated business credit card, you’ll keep your personal expenses separate and avoid losing track of deductions, which can lead to paying more taxes than necessary.
Business credit cards usually allow business owners to add employee cards for free. Employee cards can help you track employee spending and accelerate the reimbursement process.
Additionally, you can often set individual spending limits for each employee or restrict purchases to specific merchant categories. As the business owner, you can also earn rewards from employee card purchases to use toward future flights, hotels, and other redemptions.
Related: How to add an authorized user to a business credit card
When you apply for a business credit card, you may have the opportunity to earn a welcome bonus. Often, credit cards for business owners offer larger welcome bonuses than similar cards for consumers — alongside higher spending requirements.
For example, the Capital One Venture X Business has a welcome bonus of 150,000 miles after spending $30,000 within the first three months, while the Capital One Venture X Rewards Credit Card bonus is half that amount. With the personal Venture X, you’ll earn 75,000 miles by spending $4,000 within three months.
Always pay attention to the minimum spending required for these bonuses. Some business cards require significantly more spending to earn a bonus (like in the example above). You may want to wait until you have a large upcoming business purchase before applying for a business credit card, so you can ensure the spending requirement is within your budget.
Read more: Best credit card sign-up bonuses
Business credit cards typically have different bonus categories than personal credit cards. While they can overlap with bonus rewards on travel or dining purchases, business credit cards often offer bonus rewards tailored to typical business expenses, like shipping purchases, online advertising, telecom spending and office supply stores. Additionally, some offer bonus points for large purchases, such as over $5,000 or more.
Some people take advantage of both personal and business credit card bonus categories to maximize their rewards. Two common card pairings that use this strategy to maximize rewards are the Chase trifecta and Amex trifecta.
This article was edited by Kendall Little
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