When To Use Your Business Credit Card

You’re holding the bill as you reach for the business credit card in your wallet. Do you charge the expense to your company’s line of credit or use your personal card? This can be a tricky judgment to make — especially if you’re an entrepreneur or business owner. To help you decide, here is some advice on when you should and shouldn’t use your business credit card:

Shouldn’t: Personal costs

This should be an obvious no-no, but a surprising number of people still do it. It’s tempting to charge personal expenses to your business credit card, but you should keep such purchases separate from your business expenses. Mixing these makes accurate bookkeeping very difficult and could put you at tax and legal risk — whether you’re an employee or the business owner.

If in doubt, the safer option is to use your personal card and avoid potential issues. As Ethan Steinberg of The Points Guy says, “Most credit card issuers don’t allow small-business owners to put personal expenses on a business credit card. If you do, it’s possible you could be breaking the terms of your cardmember agreement.”

Should: Online expenses

A business credit card provides your company with a convenient, safe way to make online purchases deemed legitimate business expenses. It’s far easier than using a personal credit card and then processing a reimbursement. Plus, the fraud protection credit cards carry can help protect your company from security risks.

This allows employees to easily pay contractors or purchase products like office supplies. You can also use a credit card to establish recurring monthly or annual payments to vendors.

Shouldn’t: Expensive items

If you plan on purchasing pricey new machinery, fleet vehicles, or other physical assets that you can’t pay off immediately, don’t use a business credit card. The high interest rates placed on unpaid credit card balances make them a risky means of affording expensive items.

The Investopedia Team recommends, “Even though it takes extra effort to secure a loan from a bank or other lending institution, it often makes financial sense to do so, as the interest rate on credit cards is typically much higher” than on other loan types.

Should: Company meals

This policy is set by each company individually, but you may be able to use your company’s credit card to pay for lunch outings with your coworkers, team, clients, or partners.

Bankrate’s Creditcards.com contributor Elaine Pofeldt says, “Charging lunch with co-workers on a company card might not be considered misuse of company funds if it was business-related. But make sure to know your employer’s policy before charging.”

When you do charge a meal, don’t go overboard; stick within a reasonable spending cap and be sensible about what you order.

Shouldn’t: Frivolous products or luxuries

As with having a personal credit card, it’s tempting to charge freely without regard for how much money you’re actually spending. Be frugal with your company’s credit card as if it were your own. Or else, you could be wasting company funds while nearing the credit limit.

It’s important to use your business credit card wisely to avoid any personal liability that may befall you from unwise spending habits. Set up transaction notifications when the card is used, and review every charge on the monthly bill.