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What Are The Consequences Of Putting All Of My Spending On My Business Credit Card?

by on June 23, 2013 · 16 comments

in American Express, Chase, Credit FAQ, Sunday Reader Questions, Video Blog Post

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Our first question this weekend comes from TPG reader Kevin who wants to know what the downside of using a business credit card for the majority of his spending would be:

“What would be the negative consequences of having all my spending on business credit cards be? I guess this shows my lack of understanding of personal vs. business credit histories.”

I’m sure many readers are wondering the same thing since I know a ton of people recently got in on the 60,000-point offer this week (which lasts until tomorrow!) for the Ink Bold/Ink Plus from Chase, and the recent limited-time 75,000-point sign-up bonus offer for the Business Gold Rewards card from American Express that was available last month – and now are wondering how to meet the minimum spending requirements on those cards in order to earn the bonus.

While it is a good idea to put most of your spending on business credit cards, there are some key differences between your personal and business credit lines that you should know about.

Earn 50,000 Membership Rewards points with the Business Gold Rewards Card.

Earn 50,000 Membership Rewards points with the Business Gold Rewards Card.

Business credit cards generally have fewer consumer protections and higher interest rates and fees. Since business credit cards are not monitored like personal credit cards, credit card companies can frequently change your APR and tack on additional fees and penalties. As long as you’re paying off your bill every month (which you should be doing regardless of the type of credit card you have), though, these fees and changes don’t really matter and won’t affect you. But if you don’t pay off your bill in full every month, you’ll get stuck with large fees that will negate the value of any miles and points that you’re earning.

The main benefit to putting your spend on a business credit card is that your business credit cards’s activity sits on your business credit report and any balances you have there don’t affect your personal credit score. Utilization of your credit is the number one factor in determining your FICO score at 35%, so if you’ve got tons of available credit on your personal credit line and you’re using 0% or a minimal amount, your score is going to shoot up.

Utilizing

Utilization of your credit is the number one factor in determining your FICO score.

If you pay your bills in full and on time, a lot of time the credit card companies will still report your balance even if you made the payment before it was due – it just depends on when a credit inquiry takes place. That is why having all your activity on business credit cards is smart because it will help keep your personal credit score in good standing since low or no balances will be reported.

You still have to be very careful of the different fees associated with business cards and make sure you pay off your balances in full each month, but there really are no negative consequences to only using a business credit card. As long as you’re smart about your spending and don’t go overboard just because it won’t affect your personal credit score you should be fine.

To learn more about the benefits of getting a business credit card, read this post.

Disclaimer: The responses below are not provided or commissioned by the bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by the bank advertiser. It is not the bank advertiser's responsibility to ensure all posts and/or questions are answered.

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  • Roger

    You and your fellow bloggers make this all too peachy. There are consequences in putting personal spend (which is what the title of your post implies) on a business credit card. Why risk being blacklisted at Chase or AMEX?

  • David

    Why would they blacklist you? They have no idea if a charge is personal or business nor why would they care. They want you using their card.

  • Charles Clarke

    The personal spending on a business card is one of those ethics lines that people argue about. Since it is against the terms that you agreed to, some folks feel it is not honoring their agreement and they value their word highly. Since it isn’t illegal and may be difficult to detect, others have no problem with it.
    They could blacklist you for doing so if they found out because you violated their terms of service(which I believe was recently made a criminal act if it was software, but not sure about credit cards), but I have no idea why they have the terms in their agreement in the first place so I don’t know why they would take action. My best guess for it is that since business cards don’t have the same protections personal cards do, it gives them an out if you come after them for those protections on personal spend on a business card. Though, again, I don’t know for sure.

    Do what your ethics allow. If the credit card companies don’t like it, they can do something about it.

  • Charles Clarke

    BTW, some companies do report your business cards on your personal credit report, so it won’t always hide your spend. I find it irritating as I do view the 2 separately and don’t like it when the large insurance premiums hurt my utilization rates.

  • Gina

    This answer frustrates me, as both an accountant and a business owner. From a credit card reward maximization point of view, I get it. But from a business owner point of view, at least acknowledge the fact that personal and business expenses should not be commingled and there can be serious consequences. Piercing the corporate veil isn’t some strange government myth and it’s just a bad business practice. Sounds like Kevin needs more than just credit card advice.

  • phil

    @TPG,

    I’ve heard your FICO will be higher if you have ~10% utilization not 0% on your cards.

  • Chris

    I have been told by multiple Chase reps in various departments spending of any kind is allowed on a business credit card. Are there even reports of people getting blacklisted for using business cards for personal expenses?

  • Elenor

    Didn’t I read somewhere that Ink Bold (Plus?) IS reported on your credit report — or is that just your biz credit report? (Except, biz’s don’t HAVE credit reports, do they?) Very confusing.

  • Rob P

    Would you please be more specific on those consequences? Thank you.

  • Rob P

    Would you please be more specific on those consequences? Thank you.

  • Scott

    Many personal cards include some sort of purchase protection – so if your 13-month old electronic toy with the one year warranty dies, it may be covered if purchased with a personal card. I thought most business cards don’t offer that protection.

  • burnside

    commingling of funds is one of the most important factors in determining whether the corporate veil should be pierced (aka creditors can come after you personally). this puts at risk the legal protection you get from forming a business entity such as an LLC, which can shield you from personal liability.

  • BK

    The Ink Plus definitely reports on my personal credit reports, while the Ink Bold I canceled to get the Ink plus did not.

  • UAPhil

    From a more practical perspective:

    1. Consumer protections are stronger on personal cards than on business cards.

    2. Benefits we count on with personal cards may be missing from business cards. For example, if you rent a car outside the US, you are automatically covered if you use the personal SPG Amex, but not by default if you use your business SPG Amex (you need to sign up to pay an extra fee to get international coverage on the business card).

  • vortix

    Commingling expenses is unorganized and poor practice. But there’s nothing inherently wrong with it IMO.

  • Justin Martin

    I am glad someone mentioned this because none of the bloggers ever discuss this.

    However, I think most people who are gaming the system don’t actually have anything to lose because the business isn’t real in the first place.

    In addition to what Burnside said its not just creditors because if you get sued for something like someone slipping in your business or any other liability , then the Plaintiff can can come after you if the business can’t pay the judgement.

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