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Should you use your personal credit card for business purchases?

Wednesday, June 20, 2012 at 4:22:52 AM

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If you own a small business, you probably know that it's not easy to keep up with everything your company needs to run smoothly. This is especially true if you have to buy a lot of supplies for the company.

And one concern many small business owners may face is that they don't have the cash on hand to make all the purchases they need to. If you run your own company, this might therefore necessitate your putting business purchases on your personal credit card. However, some caution that this might not be the best idea.

In most cases, there are two reasons experts say

small business owners shouldn't put their company's purchases on their own credit card

. For one thing, it can make it far easier to max out their own credit card, putting them under significant financial strain, and further, it can be more difficult to weed through these documents to identify what purchases were business expenses, and which were personal.

What can you do instead?


But if you have come to rely on your personal credit card for business purchases, and don't think you would be able to handle all the transactions you need using only the company's cash on hand, it might be time to apply for a business credit card instead.

These can be extremely helpful because they mitigate the above concerns that many small business owners may face, and also carry the added benefit of having a

higher credit limit

, which can help to make your company more flexible financially when it needs to be.

But are there drawbacks?


The most obvious downside of using a business credit card is that, because it comes with a larger credit limit than traditional consumer cards, it can be more tempting to rack up larger balances, which in turn can lead to far higher costs.

There is another significant problem you might run into with a business card, however. The protections that consumers enjoy on personal accounts are not applied to those for businesses, so

account terms, such as interest rates, can change with very little warning

.

For this reason, it is extremely important to look over a number of business credit card applications before settling on any one account, so that you can identify the credit card offer that will work best for your unique financial situation.



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