Just because you can, doesn’t mean you should — especially if you already promised not to.
There are many good reasons to keep your personal and business purchases separate, but it can be a little challenging to keep a clean line between your expenses when you have a small business, especially when it’s a business of one.
As a sole proprietor who works from home, some of my personal purchases wind up as a part of my business life — and vice versa. Is that new laptop solely for work, or will I end up doing a bit of personal shopping between meetings?
This issue can also rear its head when you’re shopping with a business credit card. You may head to the office supply store to pick up printer paper for your day job, but why not get bonus rewards on toilet paper while you’re there? After all, your fancy business credit card earns 5% back at the office supply store.
Most issuers have policies prohibiting personal purchases
Putting personal expenses on your business credit cards can be a headache — in more ways than one. Not only could it complicate things at tax time, but many card issuers have policies against mixing business and pleasure.
In fact, if you read the fine print on the application for a business credit card, you’ll typically see something like this:
“I certify, understand and agree that: 1) This is a business account which shall be used only for business purposes and not personal, family or household purposes…”
While the above quote is from a Chase business credit card application, rest assured that you’ll find similar lines in applications for American Express, Capital One, and just about every other major card issuer. Essentially, before you even receive your new business credit card, you’ve acknowledged that it’s against the issuer’s policy to use that card for personal purchases.
The potential consequences
So, what are the actual ramifications for breaking the issuer’s no-personal-purchases policy? Well, it depends a lot on how obvious you’re being.
In most cases, it’s not that easy for an issuer to tell personal and business purchases apart. In the earlier example of buying toilet paper from the office supply store, the issuer likely won’t know what, exactly, you purchased. Even if it does, it probably doesn’t know whether you’re working from home or an office, so the issuer can’t immediately tell if your office supply store visit was for your business or your family.
That said, some types of personal purchases could be obvious. It’s very unlikely that your sole proprietorship has a legitimate business need for a trip to Disneyland for four — so that would probably set off some red flags.
If your business credit card issuer determines that you’ve been abusing its card policies, it could very well decide to close your account. Since issuers have full discretion over who they lend to (and for how long), that closure could come without warning or the opportunity to appeal. You may even lose any rewards you’ve earned along the way.
The bottom line
At the end of the day, the answer to whether you can put personal purchases on a business credit card is: You technically can — but you shouldn’t.
While issuers have a hard time telling the difference between personal expenses and legitimate business purchases, they don’t need a case that could hold up in court to cancel your credit card. You agreed to use the card only for business needs when you signed up, so even a suspicion that you’re doing something you shouldn’t could end up with a closed account and lost rewards.
Additionally, there’s often limited benefit to putting a personal purchase on a business credit card. With the possible exception of office supply stores, you’ll likely get much better rewards for most personal purchases by using an appropriate consumer rewards credit card than you would using a business card.