Using Personal Credit Card for Business Expenses & Vice Versa

If you’ve recently started a new business, you may be wondering about the best way to pay for business expenses. We often see people asking if it’s okay to use a personal credit card for business expenses – and conversely, if using a business credit card for personal use is okay. Let’s dive in and explore the topic.

personal credit card for business expenses

Business & Personal Expenses: Best Practices

First and foremost, it’s good to understand one important fact:

Business and personal expenses should always be kept as separate as possible.

That means, ideally, you’ll have a separate credit card, AND a separate bank account for your business, in addition to your existing personal accounts.

In short, you should:

  • Keep business expenses separate from personal expenses
  • Keep very good records of all business expenses
  • Keep physical receipts for business expenses
  • Use different accounts for business & personal expenses

While the above are the best practices for mixing business & personal purchases, not everyone will follow these guidelines. If you choose to not completely separate business and personal expenses, keep reading the sections below for some frequently asked questions.


Using Personal Credit Card for Business Expenses

Can I use a personal credit card for business expenses? 

We don’t recommend it, but it is possible to use a personal credit card for business purchases. This might make sense if you’re just starting out with your business. In the long-run, though, you’ll definitely want to get a dedicated business credit card to keep things separate.

Can I pay a personal credit card with a business checking account? 

If you have a business checking account set up, but don’t have a business credit card, there are a couple options. One is to just use your business debit card, which will draw funds directly from your business checking. The other is to use a personal credit card and pay off those charges from your business checking. We recommend just using the business debit, although it is technically possible to pay your personal credit card from a business account.

Things to note: 

  • You’ll need to keep very detailed records to avoid issues with bookkeeping and taxes
  • It’s best to use a separate credit card for all business purchases. So if you have 2 personal credit cards, start using one exclusively for business and one for personal. This allows you to have a “business” credit card without actually applying for a separate card.


Using Business Credit Card for Personal Use

Can I use a business credit card for personal expenses? 

We don’t recommend it, but its possible. If you have an old business card that’s no longer used for business expenses, it’s okay to use it on your own personal expenses. However, try not to mix the two – and keep detailed records of everything. It’s also best to pay off the charges from your personal account, rather than a business checking account.

Is it illegal to use a business credit card for personal use?

It’s not illegal, so long as you don’t do any sketchy bookkeeping or try to claim personal expenses as business expenses. With that said, it could be against the terms and conditions of your card agreement, so it could cause issues with the bank/card issuer who gave you the business card.

Can I use my business debit card for personal expenses? 

It’s a bad idea to use a business DEBIT card for personal expenses. Money is immediately drawn out of your business checking, creating a muddy bookkeeping situation. With a business credit card it’s a little different, as you can pay it off from a personal account.

Things to note: 

  • Business cards aren’t covered by the same consumer protections as personal cards.
  • It’s not illegal to use business cards for personal use, but the card issuer could close your account if they wanted to. Business cards are meant to be used solely for business purchases, as far as the card issuer is concerned.
  • Credit reporting is different for business cards. See this guide for details
  • Detailed bookkeeping is always important, but it’s absolutely essential if you’re mixing personal and business expenses on the same account.


Tax Implications 

Note: I am not a CPA. Speak with your accountant if you have tax questions.

Are business credit card rewards taxable?

Here’s where this can get sticky: credit card rewards are not generally considered taxable income – but business credit card rewards are treated differently. With business expenses, the rewards you earn are not taxable income, but they do lower the cost of the item and therefore the deduction you can take. So if you make a $1000 business purchase and earn $50 in rewards, technically you should claim a business expense of $950. So, this can get weird when expenses are mixed. Read this article and talk to your tax adviser if you have questions.

Can I use business credit card rewards for personal use?

If you have accrued rewards on a business credit card, there’s generally no issue with using those rewards for personal travel. However, consult with your tax adviser about the tax implications of doing so.


Final Thoughts

Bottom line: it’s best not to mix personal and business expenses.

It’s understandable to want to keep things simple by using your existing personal accounts for your business purchases. However, in the long run it’s actually far more simple and clean to get completely separate accounts.

Lastly, we recommend speaking to a qualified tax professional if you have any questions.

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