Stop Using Your Personal Credit Card for Business

Cash flow issues during the start-up phase are something that many entrepreneurs have had to navigate. Unfortunately, many small business owners use personal credit cards to fund business-related purchases. Given the potential for damaging long-term effects, we’ve listed six reasons you should use a company credit card for business-related expenses.

1. Liability 

The debts you accrue on a personal credit card are your responsibility. Business transactions can require thousands of dollars, pushing you to max out your credit limit in short order. As a result, you’ll be left with no headroom for day-to-day transactions.

If you decide to take the recommended route of opening a business account with a business credit card, you’ll likely have a higher credit limit, and liability will rest with the business. Your financial status will usually be protected, but this can vary depending on the nature of your business structure.

2. Credit Rating

Every business transaction you carry out with your personal credit card can directly impact your credit rating. If you were to find yourself maxed out or defaulting on your minimum payment, it would negatively affect your personal credit rating. This would leave you in a difficult position if you looked for future loans, like mortgages.

3. Employee Purchases

You should avoid being in a situation where employees use your personal credit card on the business’ behalf. In many small businesses, using the company credit card for business-related purchases is standard practice. Plus, adding employees to a company card is easy and trackable.

4. Rewards Programs

One of the biggest benefits of using a credit card is earning reward points. Did you know company cards often have specialized rewards programs tailored to businesses? Rewards can range from discounts on hotels, flights, business services, and more. 

Before you take the plunge, research which credit cards offer business rewards that align most accurately with your needs.

5. Tax Season

When tax season arrives, you want the process to be as painless as possible. Looking through your personal credit card statements to try and identify business expenses takes time, could lead to error, and even end in an audit. Save yourself the frustration by keeping these expenses in one place: your business credit card.

6. Building Business Credit

While this may seem obvious, using your business credit card will help you build creditworthiness. This is essential for any small business, as it will lead to more financial opportunities down the line. Potential lenders want to see your business’ track record of handling credit responsibly and appropriately.

What You Can Do

While it might be okay to turn to your personal credit in a pinch, it shouldn’t become a common occurrence. The good news is that there are several financial solutions tailored specifically to small businesses in this situation. If you’re looking for support, some options include government grants, federal small business loans, and even microfinance packages from lenders like Vancity.

Small Business BC is Here to Help

SBBC is a non-profit resource centre for BC-based small businesses. Whatever your idea of success is, we’re here to provide holistic support and resources at every step of the journey. Check out our range of business webinars, on-demand E-Learning Education, our Talk to an Expert Advisories, or browse our business articles.