Credit cards are a popular way to pay for purchases. They offer a convenient and safe way to pay for purchases, and rewards credit cards offer even more value when managed well. 

When you’re a business owner, it can get more complicated though. 

• What happens if you use your business card for a personal purchase?
• If you can’t qualify for a business card, can you use a personal card for business expenses?
• What are the advantages of one type of card over the other?

We’ll answer all these questions and more to help you choose the right card for personal vs. business expenses. 

How Can I Keep My Business and Personal Credit Card Expenses Separate?

Ideally, you will want to have at least two credit cards: one for business expenses and one for personal expenses. This will cleanly separate your business and personal finances. You can use each card for the appropriate types of purchases. 

It will also make bookkeeping and tax time easier. Accounting software often allows you to link your business bank account and import transactions to save time. 

If you decide to use a personal credit card for business purchases, consider using a card dedicated just to business expenses. 

Is There a Difference Between a Personal and Business Credit Card?

Personal credit cards and business credit cards generally work the same. You make purchases then make payments to the credit card issuer. Most cards allow you to pay your balance in full to avoid interest, or carry a balance and pay it off over time by making minimum payments or something in between the minimum and the full balance. 

Here are several key differences and similarities between the two types of cards:

1. Business credit cards may help your business establish business credit. 

Most card issuers report payment history to at least one of the major business credit bureaus. Paying on time can help you build your business credit scores. 

Personal credit cards can help you establish good personal credit scores, if you pay on time and avoid high balances. 

2. Business credit cards may not affect your personal credit scores. 

This can be helpful if you need to carry a balance from time to time. Let’s say you decide to use a 0% intro APR business credit card to finance a piece of business equipment interest-free over several months. 

If that balance were reported on to consumer credit bureaus, it could affect your debt utilization, and your personal credit scores could suffer. But since most business cards don’t appear on personal credit reports unless you default, you may be able to avoid that problem.

3. Business credit cards often feature business-friendly perks. 

Business cards may offer rewards programs with higher cash back rewards or points for purchases in bonus categories like office supplies. They may offer generous welcome bonuses to entice high-spending business customers. And they may offer perks like free employee cards or expense management tools. 

4. Business credit cards often offer higher credit limits. 

Since small business owners tend to spend more than consumers, issuers often offer higher spending limits. Your credit limit will depend on your credit history, income, spending habits and other factors. 

5. Consumer protections differ. 

Both consumer and business credit card purchases are covered by the federal Fair Credit Billing Act which limits your liability for fraudulent purchases, and gives you the ability to dispute certain purchases. 

Business credit cards, however, aren’t covered by the Credit CARD Act which protects against certain practices like raising your interest rate immediately if you make a late payment. 

6. Business credit cards are helpful for business financing.

While it’s true you can fund your business with a personal loan or credit card, using a business credit card can be a viable alternative that may not affect your credit scores. In fact, it’s a popular financing option for startups which often have trouble qualifying with traditional small business lenders. 

Most business credit cards offer a line of credit you can tap when cash flow is tight. The interest rate may be higher than some types of financing (such as small business loans from banks) but lower than others, such as merchant cash advances. 

7. Qualifying is similar—and different

You’ll need to answer more questions on a business credit card application than one for a personal credit card. That’s because you have to supply personal and business information. However, many issuers will evaluate personal creditworthiness; only a few will pull business credit scores. 

If you have just started a business, you may not realize that most business credit card issuers don’t require extensive time in business or business revenues to qualify for a business card. Major issuers like American Express, Capital One, Chase, and others check the applicant’s personal credit scores, and will consider household income from all sources, not just the business. 

Similarly, sole proprietors often qualify for business credit cards. While some card issuers require a business entity like a corporation or LLC, many do not. 

If you are concerned about a personal credit check, there are EIN-only business cards that don’t check personal credit. 

8. Both (usually) require personal guarantees

With a personal guarantee, the issuer may try to collect from your personal income or assets if you default. It’s a given with a personal credit card, but may also be required with a business credit card. 

What Expenses Can You Put On Your Business Credit Card?

Practically speaking, you can use your business credit card anywhere that card is accepted, as long as you stay under your credit limit. But if you’re going to use your business credit card as it is intended you’ll want to limit purchases to business-related expenses, whether that’s advertising, office supplies, business meals, or other types of business spending. 

How Can I Separate Personal and Business Expenses on My Credit Cards?

Your best bet is to use a business credit card for business purchases and a personal credit card for personal purchases. If you are having trouble qualifying for a business credit card, you may want to consider a business charge card or a business credit card for bad credit. 

Another option is a business debit card tied to your business bank account. Just be aware that these cards don’t carry the same protections as credit cards. You can’t dispute a purchase a month later, for example. 

Can I Use a Business Credit Card for Personal Use?

When you get a business credit card, you likely agree that you will use your business credit card for business purchases only. While your card issuer isn’t going to look over your shoulder and scrutinize each purchase, there can be consequences to using your card as a personal card. 

If you have trouble paying the card back and default, the fact that you did not adhere to the terms of the card agreement could create problems. 

It’s even possible the card issuer could close the account and rescind any rewards accrued, though for practical purposes this is not likely to happen. 

There is an important reason you should use a business account for business purchases. Regularly commingling business and personal expenses may jeopardize the asset protection benefits of your business entity, such as an LLC or corporation. This is often called “piercing the corporate veil.” 

Is It Illegal To Put Personal Expenses on Business Credit Cards?

It’s not illegal to use your business credit card for personal purchases, but it may violate your cardholder agreement. 

If something happens— you accidentally charge a business expense to your personal card, or vice versa—don’t panic. Just keep good records of business expenses, and ask your accountant to explain the best way to handle these situations for bookkeeping purposes. 

What Are the Tax Implications of Using a Personal Credit Card for Business Expenses?

Using a dedicated credit card for business purchases can help you keep track of tax deductible expenses. That’s true whether it is a personal or business card. There’s no reason you can’t use a personal card for business expenses. (After all, most businesses in the US operate as sole proprietorships, with no separate legal entity. That means the person and the business are essentially the same.)

However, once you start commingling personal and business expenses on the same card, you may run into a situation where you can’t remember (or document) whether you used a card for personal or business reasons. 

Were those office supplies you charged in August really office supplies or were you back to school shopping for your kids? Was that meal for business or personal use? Keeping good track of receipts can help alleviate some of this concern, but it’s still easier just to use each card for its intended purpose.

Can You Write Off Business Expenses on a Personal Credit Card?

If you use your credit card exclusively for business purposes, you may be able to deduct your annual fee, interest, and other charges. In addition, you should be able to write off tax deductible business purchases regardless of the payment method. The IRS requires these business expenses must be “necessary and ordinary” and you’ll need to be able to provide documentation.

If you mix business and personal purchases on the same card, that’s going to make it difficult to distinguish personal vs business fees or interest. Check with your tax advisor. 

How Do I Find the Best Business Credit Card?

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