No, you cannot use a business credit card for personal expenses. Business credit cards need to be used for legitimate business purposes only.
So why write an entire blog post about using business credit cards for personal use? Well, there is commonly an overlap between business and personal expenses. When lines get blurred, that’s where unintentional errors occur - and sometimes with major consequences.
Let’s take a look at the breakdown between business and personal expenses, and everything you need to know to make sure you keep them separate.
Personal vs. business expenses
Personal expenses refer to anything for personal use, but not relating to your business, such as eating out at restaurants, shopping and holidays.
There is commonly an overlap between business and personal expenses, though accounts are handled very differently. Therefore, it is crucial that business expenses be separated for ease of tax filing and expense management.
What is considered a business expense?
- Office-related costs including furniture, uniforms, cleaners, computers, and screens
- Office rent or home office expenses
- Vehicles and maintenance
- Marketing costs including online and offline advertising
- Company health or life insurance and other employee benefits
- Travel for work purposes, conferences, and client meetings
- Mobile phones, landline bills, and internet
- Business lunches, teas, and coffees
- Office socials and team bonding
- Anything else directly related to your business
What is not considered a business expense?
- Meals during personal time
- Clothing for social use
- Vehicles for personal use
- Personal travel or holiday
- Phones, computers, and electronics for personal use
- Personal errands
- Anything not directly related to your business
What can happen if I use my business credit card for personal expenses?
Your credit account might be closed
Using your business credit card for personal use is strictly prohibited by most business credit card issuers. Even if you don’t lose your account entirely, your credit limit could be lowered.
Both your personal and business credit scores might be affected
Many business credit cards require a personal guarantee, meaning the account holder is obligated to repay any credit issued in the event that the business is unable to pay. So, should a business default on a payment, it is well within a business credit card provider’s rights to report to both business and consumer credit bureaus - with potentially devastating consequences for both business and personal credit scores.
Similarly, if you’re doubling up on your business credit card with both personal and business expenses, it might be harder to pay them both off in full, which can have negative implications for both your personal and business credit score.
It will be harder to track your business expenses and your taxes will become more complicated
Personal and business taxes are completely separate entities. When you muddle your expenses by grouping them together, you’re just creating more work for yourself later. And if you get it wrong, you can make your tax return void and incur serious penalties.
You might become personally liable
If you use a business credit card for personal use, the responsibility to pay that bill does not fall on the business - it falls on you. But if you can’t repay your debt, the consequences fall on both you and your business.
The one exception, though, is if your employees use their business credit cards for personal expenses without your knowledge.
In the event that company credit cards are misused by employees and have been abused for personal expenses, most providers offer financial protection to minimise costs and damage to your business.
To avoid confusion, managers should always provide clear guidelines to other credit cardholders in terms of what is defined as a business expense versus a personal expense, and should monitor credit card statements regularly.
You might lose certain consumer protections
Business credit cards are designed for business use and don’t carry the same consumer protections that personal credit cards offer. That’s why it’s so important to use your credit card for the purpose it was intended to get the most out of your protections and rewards.
It can be more costly in the long run
When you factor in personal credit score gains you won’t receive, risks of not being able to repay debt in full or at all, and the time and effort it will take to separate out your personal and business expenses come tax season (time is money!), using your business credit card for personal use becomes quite costly.
Are there any benefits of putting personal expenses on a business credit card?
What to do if you've used your business credit card for personal use?
Don’t panic! Make a note of the expense in your expense management platform so you don’t accidentally write it off as a business expense on your taxes. As long as you keep expenses separate on your taxes, and don’t frequently use your business credit card for personal use, you don’t risk committing tax fraud.
While any use of a business credit card for personal expenses risks account closure due to a violation of the card’s terms of service, a low cost accidental transaction likely won’t result in severe consequences.
Tips for keeping personal and business accounts separate
Business credit cards are a great way of keeping your business and personal expenses separate and make submitting your tax return much easier. This reduces the need for accountants to analyse individual expenses and figure out if they are genuine and allows for a much smoother process.
A lot of credit card providers offer integration with different accounting platforms so your business expenses can be easily exported straight into your accounting tool.
If your employees make business-related purchases, it may be worth requesting a supplementary company card for them. This way, you can have all business expenses in one place.
How can I manage business expenses with the Capital on Tap Business Credit Card?
There are several tools that help you manage your business expenses if you are a Capital on Tap Business Credit Card holder. All transactions made on your credit card can be categorised in your account, so you can stay on top of your expenses.
If your business has issued company cards, these can also be managed in your account or mobile app. You can set an individual spending limit for each card and view all transactions made by your cardholders.
Using a business credit card for personal use or a personal card for business is a tactic you’ll want to avoid. That’s why it’s so important to have the best possible personal and business credit cards at your disposal.