Is Using a Business Credit Card for Personal Use Illegal?

Is Using a Business Credit Card for Personal Use Illegal?

by Caroline Forbes Dec 21, 2022

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Starting a business is an exceptional achievement. However, running a business successfully could prove daunting. One of the mistakes most small business owners make is using their business credit cards for personal use. Although making personal purchases on a business card is not illegal, it is important to keep business and personal expenses separate. Technically, it is much easier to acquire a business credit card even if your business is not registered or already running. Business credit cards in the USA offer numerous benefits, including airline benefits, primary rental car insurance, easier access to airport lounges, and no foreign transaction fees. With such perks, some people are tempted to use them to pay for personal expenses. Here are some of the reasons why it is not a good idea to use your business credit card for personal use:

You may be held personally liable

Limited liability companies (LLCs) and corporations protect business owners from potential lawsuits. Therefore, your personal assets are safe if a lawsuit is filed against your business or company. However, mixing your business and personal finances makes it harder to determine which personal assets are protected. For example, if you used your business credit card to purchase a boat and face a legal claim for non-payment, the boat can be considered a business property. As an asset, the boat can be taken to help make payments. It is crucial to avoid buying personal items using a business credit card because if your business or company faces legal or financial trouble, your assets could be seized.

Negatively impacts your credit score

Building credit is important to run a successful business. Business credit cards in the USA typically require a personal guarantee when applying. Depending on the business credit service company, you may need to provide your social security number and business tax ID to guarantee that you are obligated to repay any credit. Therefore, your credit score could be impacted if you use your business credit card to purchase personal items and cannot pay them off. Remember, using your business card for personal and business expenses increases the costs and make it harder to pay off in full. If you default on a payment, your business credit card can report to consumer and business credit bureaus, negatively affecting your personal and business credit profile.

Makes it harder to track business finances

Good record-keeping is vital when running a business because it helps you understand where you are losing money. Also, if you are looking for funding solutions in USA, you must provide your tax returns, bank statements, balance sheets, and profit and loss statements, among other documents. If you are poor in record keeping or mix your personal and business finances, you reduce the chances of acquiring a business loan in the USA. Other times, getting business loans for a start-up will attract higher interest rates because you use a business credit card to make personal purchases. Even if you keep a good record for future references, personal expenses can affect your business reports making it hard to see how your business is doing financially. Although it might seem like a good idea, you could be hurting your business in the long run.

Complicates tax returns

Although running your business could be challenging, mixing your business and personal expenses can make it much more difficult. Using your business credit card in the USA to pay for personal items makes it harder to track and manage business expenses, thus complicating tax returns and business reporting. Suppose you accidentally declare a personal expense as a business expense and are audited by the Internal Revenue Service (IRS). In that case, you may end up paying hefty fines, penalties, or back taxes.

It is costly

Although business credit cards attract higher interest rates and fees, business expenses are tax deductible. That is not the case with personal purchases. Since they are not tax-deductible, buying personal items using a business card will cost you more, especially if you maintain a balance. Remember, when you make personal purchases with a business card, you must filter them out when filing tax returns. Whether you do it yourself or get financing assistance services, you will realize that using a business card for personal use is costly in the long run (money and time).

Losing consumer protections

Business credit cards are specifically designed for business use only and do not carry the same consumer protections as personal credit cards. Unlike business credit cards, personal credit cards are afforded certain protections by federal law. Therefore, consumers who opt to use their business credit cards for personal use lose these consumer protections. For example, they have limited time to dispute fraudulent charges if they lose their card. Also, if you use a business credit card for personal use, it is difficult to dispute charges. It is prudent for business owners to work with a reliable business credit monitoring agency in USA to ensure their finances are in order.

Violating terms of service

Most business credit service companies prohibit using your card for personal use. Putting your personal purchases on your card equates to violating the terms of service. Some consequences of violating the Terms and Conditions include account closure, card cancelation, or lowering your credit score. If your credit scores are lowered, consider enrolling in a business credit building program from a reputable business credit building agency. You will learn that there are numerous credit repair business opportunities in USA if you research well.


Although charging personal expenses on your business credit card in the USA is not illegal, it violates the terms of your business credit card agreement. Always keep personal and business affairs separate to avoid opening yourself up to personal liability, tax implications, account closure, or negatively impacting your credit score. However, if you accidentally use your business credit card to make a personal purchase, ensure you notify relevant parties and keep a record for bookkeeping purposes. And remember, if you earn any rewards with your card, you can use them for personal reasons (use) without violating the terms of service.

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