Can’t I Just Use My Personal Credit Card For Business Expenses?
According to the 2009 National Small Business Association survey, a whopping 86% of small businesses say they use their personal or business cards primarily or exclusively for business purposes.
There are several downsides of putting business expenses on your personal consumer credit card:
1. Accounting issues. Mixing personal and business expenditures on a consumer credit card can lead to accounting problems. If you put all your business spending on one card, you can probably deduct the interest and the fees for that card. But if you also put your personal purchases on the card, it will create more problems as your accountant will have a difficult time telling apart how much of the card’s balance is due to personal purchases and how much is due to business purchases.
For sole proprietorships, the commingling is fine. However, due to liability and taxation concerns, you may wish to eventually convert your sole proprietorship to limited liability company (LLC) or corporation, and these entities mandate the separation of your personal expenses from your business transactions.
Once you have that in mind, it makes much better sense to start off with a small business credit card now instead of later so that the transition will be smoother in the future.
2. Business debt will show up on your personal credit report. If you pay your bills timely and in full, small-business cards don’t usually appear on personal credit reports. But if your account is delinquent, the business debt will appear on your personal credit report.
Beware, there is an exception to this! Capital One-issued cards said that the bank recently started reporting small-business loan information to business and consumer credit bureaus. So even if you weren’t delinquent on your Capital One card, your business debt would be reflected in your personal credit report.
Also keep in mind that any surge in debt, whether business or personal, could lower your credit score.
On DailyMarkets.com, you can compare the different business credit cards to see what great benefits they offer to businesses and apply for the one that best suits you.