Quick insights
- While it isn’t illegal to use business credit cards for personal expenses, doing so may violate your credit card’s terms and conditions.
- Potential consequences may include account closure, personal liability, more complex taxes and a negative impact on both your personal and business credit scores.
- If you accidentally make a personal purchase with your business credit card, it's best to pay it off as soon as possible to avoid incurring any additional debt and related penalties.
Is it illegal to use a business card for personal expenses?
No, it’s not illegal to use a business credit card for personal purchases. There may still be consequences through your credit card issuer, though.
Many credit card issuers have terms that specifically forbid cardmembers from putting personal expenses on their business accounts. There are several possible consequences of breaking your credit card’s terms and conditions, including the closure of your account.
Are you personally responsible for your business credit card debt?
Most business credit cards require applicants to sign a personal guarantee, which puts the payment accountability on the primary cardmember if the business incurs unpaid debt. Personal guarantees essentially act as a safeguard for credit cards if businesses are unable to pay off debt.
In short, the person whose name is on the card is personally responsible for any debts, whether they are from business or personal expenses.
Consequences of using a business card for personal expenses
Using a business credit card can be a helpful way to separate your business and personal expenses. But you may want to avoid using your business credit card to earn points and rewards on personal purchases, because there may be negative consequences.
Below are a few ways that using a business credit card for personal expenses can impact you.
Your credit card issuer may close your account
When you apply for a credit card, you agree to follow its set terms and conditions. So if your cardmember agreement does not allow you to make personal purchases on your business credit card, you may be violating the terms and conditions by doing so.
If your credit card issuer flags non-business purchases on your account, they may have grounds to close your account entirely.
Before you apply for a business card, it may be a good idea to read the terms and conditions to familiarize yourself with potential violations.
Your personal and business credit scores may be impacted
There may be a negative impact to both your personal and business credit score if you can’t pay off your business credit card—regardless of whether the transactions are for work or personal matters.
However, using a business credit card for both personal and business expenses may make it more difficult to keep track of your purchases and available credit. So it’s usually best for organization purposes to use business credit cards for business expenses only.
Purchases may have fewer consumer protections
When you make purchases on your personal credit card, you have more consumer protections because of the Credit Card Accountability Responsibility and Disclosure (CARD) Act of 2009. However, business credit cards don’t have to offer the same protections.
So if you choose to put a personal purchase on a business card, that purchase may not have those same protections. This means it might be more difficult to dispute personal charges if you used your business credit card. Because of this, it’s usually best to keep personal purchases off your business account.
Your taxes may be more complex
Business expenses are usually tax-deductible, but personal expenses are not. If you mix business and personal expenses on the same credit card, it may be more difficult to tell expenses apart when it comes to tax season.
And sometimes charges are difficult to tell apart. For example, you may use your business credit card to pay for work dinners while coworkers are in town. If you also use that credit card to pay for a family member’s birthday meal or drinks with friends that same week, it may be difficult to pinpoint which charge is which during your taxes the following year.
What happens if you accidentally use your business credit card for personal expenses?
While it’s best to avoid using a business credit card for personal purchases, accidents happen. Provided you pay off the balance on time and in full, and alert any necessary parties for bookkeeping purposes, there likely won’t be any major consequences.
If you do happen to use a business credit card for a personal purchase, it can be important to keep your available credit balance in mind. For example, if you accidentally make a large personal purchase on your business credit card, that could leave less credit available for your typical business purchases.
Tracking expenses with your business credit card
If you have both business and personal credit cards, it may be difficult to manually track all of your expenses. Some business credit cards allow you to track expenses by employee card, which may make it easier to review purchases and simplify bookkeeping.
The Chase Ink suite of business cards provides employee credit cards at no additional cost and allows business owners to set spending limits for authorized users (usually employees). To view specific purchases made on employee credit cards, view the itemized statement each billing cycle. This may help you analyze expenses and identify any spending patterns. When searching for your next business credit card, it may be a good idea to find an option that allows you to set spending limits and track purchases in one place.
In summary
While using your business credit card for personal purchases isn’t against the law, it could violate terms and conditions of your credit card. The consequences could range from forgoing the consumer protections a personal credit card provides to potentially risking losing your business credit card account.
Learn more about how business and personal credit cards work to help you understand some ways to effectively manage your credit card accounts.
