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Updated: 31 December 2024
When you’re running a business, it’s tempting to reach for whatever card is closest when you need to make a purchase. And while using a personal credit card for business expenses isn’t forbidden, it can create headaches further down the line. From accounting issues to missed tax benefits, mixing personal and business spending might save time today but cost you tomorrow. We look at the pros and cons to help you make the right choice.
While using your personal credit card for business might seem like a simple solution, it’s worth understanding exactly what advantages this approach offers, and whether they outweigh the risks, such as complicated accounting, limited tax benefits or personal liability issues.
If you’re just starting out or need immediate payment options, using your personal card requires no additional applications or waiting periods. You’re already familiar with your credit limit and payment terms.
Business transactions on your personal card can help strengthen your credit score, assuming you maintain consistent, timely repayments. This may be particularly valuable if you’re a new business owner with limited business credit history.
Personal credit cards occasionally offer lower fees than their business counterparts, and you might already have access to rewards programs or 0% interest periods that could help manage expenses.
While these benefits might appear attractive, they come with significant drawbacks that could impact both your business and personal finances. Let’s look at why keeping things separate is usually the more strategic choice.
Keeping your business and personal finances separate is good practice and helps you protect both yourself and your business. Here’s why mixing the two can lead to problems.
Separating business and personal expenses becomes increasingly difficult when they’re on the same card. For instance, imagine sifting through dozens of transactions to determine whether a coffee purchase was for a client meeting or your morning routine. It quickly becomes a time-consuming and error-prone process. When it’s time to prepare your accounts and tax return, you’ll need to manually sort through statements to identify which purchases belong to your business.
Business credit cards often offer tax advantages and deductions that personal cards don’t. Using a personal card means you might miss out on valuable tax benefits, and it can make it harder to prove business expenses during an HMRC audit.
Personal credit cards typically offer lower credit limits than business cards. As your business grows, you may find yourself juggling multiple cards or reaching the limit at important moments, restricting your ability to make important purchases or manage cash flow effectively.
When you use a personal card for business, you’re creating a direct link between your personal and business finances. This could compromise your limited liability protection and put your personal assets at risk if your business faces financial difficulties.
Running a successful business means making the right financial choices, and a dedicated business credit card can prove to be a better solution for managing your company’s spending. With a business credit card, your company’s expenses stay separate, making it easier to track spending, manage your accounts and maintain professional boundaries between your personal and business finances.
Business credit cards are designed with companies in mind, offering higher credit limits and features that support your operations. From expense management tools to multiple cardholders, you’ll have access to functionality that helps your business run more smoothly.
Perhaps most importantly, building a strong business credit profile is helpful for future growth. Using a business credit card helps establish your company’s creditworthiness independently of your personal finances. Having a strong credit history could prove valuable when you need to access other forms of finance to expand or seize new opportunities . It shows potential lenders that your business can responsibly manage credit in its own right.
Finding the right credit card for your business means understanding what each option offers and how it matches your needs. At Funding Circle, we have two distinct options designed to support different business goals.
Ideal for businesses looking to earn while they spend, our Cashback card rewards you for your everyday business purchases. With a market-leading 2% cashback for the first six months (up to £2,000) and 1% uncapped after that, it’s designed to make your money work harder and give you cashback on everyday expenses.
If managing cash flow is your priority, FlexiPay offers a different approach. Rather than traditional credit card interest rates, it gives you the freedom to spread costs over a timeframe that works for your business, with just one simple fee per transaction.
Both cards are designed to give you quick decisions without affecting your credit score, and you can start using your approved credit limit straight away to cover all aspects of your business’s expenses.
Whether you choose our Cashback card for rewards on everyday spending or FlexiPay for flexible payment terms, switching to a dedicated business credit card can help protect your personal finances while supporting your company’s growth.
31/12/24: While we want to help as much as we can, the information found here is provided solely for informational purposes and should not be considered financial or legal advice. To the extent permitted by law, Funding Circle does not accept any liability for any loss or damage which may arise directly or indirectly from the use of, or reliance on, the information contained here. If you have any questions, please speak to your professional adviser or seek independent legal advice.
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