Keeping your business finances separate from your personal ones is a smart decision. But sometimes, when running a small business, that can be difficult to do. If you do use a personal credit card for business purchases, you’re certainly not alone. In fact, over 65% of all small business use credit cards on a regular basis, but less than 50% of those cards are actually in the company’s name. It’s not only dangerous to use personal credit cards for your business purchases, but there are key advantages to swiping those purchases with a business credit card.
When you get a business credit card, it establishes a distinct separation between your personal and business purchases and can alleviate some major bookkeeping stress. Also keep in mind that when you mix the two, you are commingling expenses, which in turn exposes your business to risk and potentially threatens the integrity of it as well. You’ve worked hard to build your business, don’t jeopardize it.
Mixing personal and business spending on a personal credit card can create a bookkeeping disaster. Having well organized records of your business purchases and expenses is essential when preparing to file your business tax returns. If you intermingle business and personal expenses using a personal credit card, you must manually go over the account at the end of the year and determine which expenses are for the business. Always think of the “KISS” method: Keep It Simple Smarty.
Business credit cards often come with tools to organize and categorize your business spending. You can get multiple cards for employees that will make streamlining your spending simpler. You can easily limit an employee’s individual monthly spend and where they can use the card.
Many cards now offer incentives and rewards for spending. Since your business will have larger expenses, you can earn bonus points on those expenses that are oftentimes tied to a specific category. Let your business reap the benefits. It can help the bottom line.
If you get a business credit card, you'll likely have a business credit score. If you use your card responsibly, you could improve your score and get lower interest rates in the event you need to take out a business loan. If your card issuer reports your business card activity on your personal report, this could improve your credit score, too.
If you treat your business credit card like you would a personal credit card (that is, responsibly), you’ll be able to take advantage of the many perks offered to business owners. You’ll have an easier time sorting your expenses, your business and personal credit will (for the most part) be kept separate, and you can enjoy gaining rewards points from both your business and personal cards. So, keep it separated and keep it simple.