There are a lot of reasons why you might be tempted to use a credit card for your business. Perhaps you’re in a pinch and need to make a purchase quickly, or you’re trying to earn rewards points that you can use for business expenses. However, there are some very good reasons why you should never use a credit card for your business.
Here are 15 important ones.
1. You’ll pay more in Interest
If you’re carrying a balance on your credit card, you’ll be charged interest on that balance every month. This is true whether you’re an individual or a business. However, businesses typically have higher credit limits than individuals, which mean they can end up paying a lot more in interest than individuals do.
2. You May Not Be Able to Get a Deduction
If you use a personal credit card for business expenses, you may not be able to deduct the interest you pay on your taxes. In order to get the deduction, you must itemize your deductions and use a business credit card or keep meticulous records of your expenses.
3. It Can Affect Your Personal Credit Score
If you’re using a personal credit card for business expenses, your personal credit score can be impacted by late payments or maxed-out credit cards. This can make it difficult to get approved for loans or lines of credit in the future.
4. You May Have Trouble Getting Approved for a Business Credit Card
If you’ve been using a personal credit card for your business, you may have trouble getting approved for a business credit card. This is because business credit cards typically require a good personal credit score.
5. You May Have to Pay an Annual Fee
Many business credit cards come with annual fees, which can add up over time. If you’re using a personal credit card, you’re likely not paying an annual fee.
6. You Might Not Get the Same Rewards
Personal credit cards often come with different rewards than business credit cards. For example, business credit cards may offer cash back on business-related expenses, while personal credit cards may offer rewards like points or miles.
7. It Can Be Harder to Track Business Expenses
If you’re using a personal credit card for business expenses, it can be difficult to track your expenses. This is because you’ll have to keep track of both your personal and business expenses in one place.
8. You May Have to Pay Foreign Transaction Fees
If you use your credit card while traveling abroad, you may be charged foreign transaction fees. These fees can add up, especially if you’re making a lot of purchases.
9. Your Credit Limit May Not Be Enough
If you have a small business, your personal credit limit may not be enough to cover all of your business expenses. This can lead to maxed-out credit cards and late payments.
10. You Might Lose Your Rewards if You Cancel the Card
If you cancel a credit card, you may lose any rewards you’ve earned. This is especially true if you cancel a business credit card.
11. You Could Be Charged an Annual Fee
Many credit cards come with annual fees, which can add up over time. If you’re using a personal credit card for your business, you might be paying an annual fee without realizing it.
12. Your Credit Card Company May Close Your Account
If you use your credit card for business expenses, your credit card company could close your account. This is because businesses are considered to be high-risk customers.
13. You Might Get Hit With a Transaction Fee
If you use your credit card for business expenses, you might be charged a transaction fee. This is a fee that the credit card company charges for each transaction you make.
14. You Could Be Charged an Interest Rate
If you use your credit card for business expenses, you could be charged a higher interest rate. This is because businesses are considered to be high-risk customers.
15. Your Credit Card Company May Report Your Activity to the IRS
If you use your credit card for business expenses, your credit card company may report your activity to the IRS. This is because businesses are required to report their expenses to the IRS.
Conclusion:
There are a few things to keep in mind if you’re using a personal credit card for business expenses. First, you may be paying an annual fee without realizing it. Second, your credit card company could close your account if they find out you’re using it for business purposes. Finally, your activity could be reported to the IRS if your credit card company discovers you’re using it for business expenses.