Can I use a personal card for business expenses? (2024)

It’s not uncommon for small business owners to use their personal credit cards for business expenses. The SBA reports that nearly half of small businesses (46%) rely on personal credit cards. And new businesses use personal credit cards (13%) more often than business loans (12%) or business credit cards (7%) to secure startup capital.

Yet just because using personal credit cards for business is a normal practice doesn’t mean it’s wise. As a business owner, it’s important to keep personal and business finances separate for both tax and liability purposes. When you develop a habit of mixing those finances together, you could open yourself up to a number of potential problems.

Can you technically use a personal card for business expenses?

Most consumer credit card agreements do not restrict you from using your account for business-related transactions. So, if you want to use your personal credit card to buy inventory, office supplies, equipment, or something else for your company, you probably can. On the other hand, if you have a business credit card, your card agreement likely states that you can only use the account for business purposes.

When it’s okay to use your personal credit card

As a business owner, maintaining a distinct barrier between your business and personal finances is the best rule to follow. Nonetheless, there are reasons why some entrepreneurs might be attracted to the idea of using a personal credit card for business purposes rather than opening a separate business credit card.

• Bad credit. You typically need good to excellent personal credit to qualify for the best business credit cards. Yet even with bad personal credit, you might be able to qualify for a secured business credit card. A secured business credit card can give you the opportunity to establish better business credit for the future. Depending on your immediate financing needs, however, you might want to consider personal credit cards for bad credit if you need to expand your credit card options while you’re working to repair your credit.
• Temporary business or side gig. Your business doesn’t have to be a full-time endeavor before it warrants a business credit card. But if you only plan to work a business or side gig on a short-term basis, you might not want to open a separate business credit card for such a temporary venture.

Details to consider when using your personal card for business expenses

If you’re considering using a personal credit card for business expenses, it’s important to weigh the benefits and drawbacks you could face.

Pros

• Consumer protections: Personal credit cards offer better consumer protections compared to business credit cards. Certain federal laws, like the Credit Card Accountability Responsibility and Disclosure (CARD) Act of 2009 that protect consumers from unfair credit card practices, don’t apply to small business credit cards.
• Convenience: Some small business owners may already have available credit in the form of existing personal credit cards that they can use for their companies.

Cons

• Personal credit risk: When you use a personal credit card for business purchases, you put your personal credit at higher risk. If something goes wrong and your business cannot repay its debt, your personal credit is on the line (though that can be the case with a business credit card too). Also, if you fail to repay the full amount your business charges on your personal card each month and carry an outstanding balance on your personal credit card, your credit utilization rate (aka credit card balance-to-limit ratio) would increase. A high credit card utilization rate could damage your personal credit score even if you make every payment on time.
• Liability risk: When you create a legal structure for your business (i.e., an LLC or corporation), it may provide you with personal legal protections if someone ever decides to sue your business. But when you mix personal and business finances, it can weaken that protection. An attorney might be able to “pierce the corporate veil” by convincing a court to hold you personally liable for business debts if they can prove there’s not enough separation between your business and personal expenses.
• Limited rewards: Some business credit cards may feature rewards that are more valuable for business-related purchases. For example, you might find a business credit card that features a higher rewards rate on advertising purchases, office supply purchases and more. If you make similar purchases on a personal credit card, you could be leaving valuable points, miles or cash back on the table.

Managing a credit card for business expenses

Whether you decide to use a personal credit card or a business credit card for your business expenses, here are three best practices you should follow:

• Always pay on time. Credit scoring models — both business and personal — pay close attention to your payment history. With FICO and VantageScore credit scores, payment history is the most important factor in the calculation of your personal credit scores. And some business credit scores (like Dun & Bradstreet’s PAYDEX Score) consider only payment history when calculating credit scores.
• Pay off your full balance each month. It’s wise to pay off your entire statement balance every month when you use credit cards. This good habit will help you avoid paying expensive interest charges and may protect your credit scores from high credit utilization rates at the same time.
• Use a separate credit card for business expenses. If you opt to use a personal credit card for business expenses, consider setting aside an account to use solely for your company. Using a dedicated account for your business could at least make it easier to keep track of business spending for bookkeeping and tax purposes.

Frequently asked questions (FAQs)