Key Insights to Keep in Mind
- Whether to tap into a personal credit card for business outlays is entirely your call, but this strategy carries its own set of perks and pitfalls.
- Personal cards tend to be easier to get approved for; if a business card seems out of reach, a personal card can help build credit and open doors to business credit in the future.
- When aiming to add employees or unlock tailored business perks, business credit cards often prove to be the smarter choice.
Using a personal credit card for business-related costs is perfectly allowed. Despite the array of cards specifically tailored to small businesses, many entrepreneurs still rely on personal credit cards as their go-to payment tool.
Reports show that roughly 76% of small business owners regularly rely on personal credit cards to cover company expenses. Let’s explore scenarios when using your personal card might actually work in your favor, and when it’s time to upgrade to a business credit card.
When Your Personal Credit Card Is the Go-To
There are times when a personal card might be the best — or even your only — option for handling expenses linked to your small business. Consider these typical situations:
Only Eligible for Personal Credit
Good to excellent credit scores usually unlock business credit cards. If you’re just starting out building credit or recovering from a rough patch, options like secured credit cards might be your ticket. These cards often start with modest credit limits, but with careful management, you can request raises later on. Once your credit strengthens, it’s easier to transition into a business credit card if you choose.
Your Enterprise Is a Side Hustle or Temporary Gig
If your business is more of a casual side gig than a full-time hustle, a business credit card might not deliver much bang for your buck. For instance, dog walking on weekends, occasional freelance photography, or other sporadic ventures don’t usually demand a dedicated line of business credit.
Already holding a few personal rewards cards? Pick the one with the juiciest cash-back, miles, or points for your specific business spend categories. Pay your balance in full each month, and you’ll stack up rewards without extra costs.
Keeping Credit Management Streamlined
Time is precious, especially for entrepreneurs juggling multiple hats. That’s why some prefer sticking with personal credit cards they’re already familiar with, rather than juggling several accounts.
“Adding another business credit card just means more to keep track of,” explains Vanessa Gordon from East End Taste Magazine. Vanessa keeps things straightforward by printing statements and highlighting which charges belong to business versus personal expenses. This offline approach helps her avoid screen fatigue and maintain clarity.
Her magazine work takes her around the globe, so she relies on cards loaded with travel benefits, such as the Emirates Skywards Rewards World Elite Mastercard®*. These cards cover a range of expenses:
- Flight tickets
- Fuel
- Meals
- Photography accessories
- Payments to photographers and videographers
- Event planning services
By settling her balance monthly, Vanessa enjoys those travel perks while safeguarding her personal credit rating.
Snagging Comparable Perks With Lower Annual Charges
When hunting for cards that blend rewards and benefits for your business, keep a keen eye on annual fees versus perks. As long as the rewards outweigh the costs, you’re winning.
| American Express® Business Gold Card | 100,000 Membership Rewards® points after $15,000 spend in first 3 months* | $375 |
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| American Express® Gold Card | Up to 100,000 Membership Rewards® Points after $6,000 spend in first 6 months (varies) | $325 |
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While the Business Gold card boasts a heftier sign-up bonus, it demands higher minimum spending within a shorter window and carries a steeper fee. If your monthly expenditures don’t align with these thresholds, the personal Amex Gold might suit you better.
Additional Facts on Credit Card Usage for Business
According to recent financial data, nearly 60% of small businesses begin with personal financing methods. Furthermore, business credit cards typically offer credit limits 20-30% higher than personal cards, enhancing operational flexibility. Interest rates tend to be similar, but introductory APR offers are often more generous on personal cards, catering to entrepreneurs easing into business spending.
Longer Interest-Free Periods May Be Available
Some personal credit cards offer introductory 0% APR on purchases, an attractive option for entrepreneurs looking to manage big expenses without immediate interest. This can be especially appealing when launching or expanding your small enterprise.
Take Kim Hawkins, president of EventsWholesale.com, a discount supplier for event and wedding needs in Watkinsville, Georgia. After branching into manufacturing heavy-duty plastic columns, she opened a personal credit card with a 0% introductory APR.
“That card enabled us to acquire nearly $100,000 worth of columns and pay it off over the next year as our revenue grew,” Hawkins shares. “Plus, we scored cash back and travel points that will come in handy for attending conferences and trade shows.”
Legal Safety Nets: What You Should Know
Choosing between a personal and business credit card can also hinge on legal protections. Although business credit cards might suggest separation of personal liability, many still require a personal guarantee.
This means if payment falls behind, creditors can pursue your personal assets, not just your business’s. Late payments can impact your personal credit score and risk liens or levies if debt collection escalates to court action.
Downsides of Mixing Personal Cards with Business Spending
- Personal Liability on the Line: Using a personal card ties you directly to the debt. If the business can’t cover the charges, your own assets could be vulnerable.
- Personal Credit Score Vulnerability: High balances or missed payments by the business could drag down your credit rating, restricting future borrowing or financing options.
- Expense Jumble: Combining personal and business charges on one card can create a headache when trying to monitor and classify spending.
- Tax Season Troubles: Sorting business expenses for deductions and reporting becomes a complex puzzle when they’re intermingled with personal expenses.
- Missing Out on Business-Specific Perks: Personal cards usually lack features like employee cards with spend caps, detailed expense reports, and rewards fine-tuned for business budgets.
When You Should Lean Towards a Business Credit Card
Consider a business credit card if you find yourself in these scenarios:
Issuing Employee Cards
Business cards typically let you provide individual cards to employees with customized spending limits without it touching your personal credit score, which is invaluable for growth.
Seeking Business-Centric Rewards
For example, some business cards offer statement credits such as:
- Up to $200 twice a year for Dell purchases (totaling $400)
- Up to $90 quarterly for job site hiring services (up to $360 yearly)
- Up to $200 annually for airline fees
- Up to $10 monthly on U.S. wireless phone services (up to $120 yearly)
Additionally, business credit cards often extend higher credit limits, providing wider financial flexibility.
Improving Expense Tracking
When your business expands, mixing personal and business expenses complicates bookkeeping. Business credit cards often integrate with accounting software, streamlining tracking for both you and your employees.
Tips for Managing Business Expenses on a Personal Card
Just like there’s no law against using personal credit for business costs, no special permits are needed. But wield your card wisely by following these guidelines:
- Stay punctual on payments and keep balances low. These are the biggest influencers of a healthy credit score.
- Maximize rewards. From sign-up bonuses to cash back, points, or miles, the key is always to clear your bill on time to avoid interest charges.
- Track and separate. Review your monthly statements carefully to identify business expenses separately from personal ones. This helps in future budgeting and tax prep.
You absolutely can rely on your personal credit card for business expenses, a practice many small business owners share. Early-stage businesses, those unable to secure a business card, or part-time ventures might find this approach most practical—for now.
*Details on the Emirates Skywards Rewards World Elite Mastercard® were obtained independently and have not been verified or endorsed by the issuer.