Thinking of using your personal credit card for business purchases? It might seem convenient, but mixing personal and business finances can lead to headaches come tax time. Learn the risks and better ways to manage your business spending.
Key Points:
- Business credit cards are specifically designed for business use, while personal credit cards are used for everyday individual spending.
- A business credit card can be a useful way to separate business and personal expenses, which can streamline and simplify tax filings.
- You can use a personal credit card for business purchases, but it requires you to separate your expenses for tax purposes.
- Small business loans offer a great alternative to using a personal credit card for business expenses, providing a lump sum of money that can be put towards starting a growing operations.
Can You Use A Personal Credit Card For Your Business?
You can use your personal credit card for your business. In fact, this may be necessary when you first start your business, as it may not yet qualify for a business credit card.
However, keeping your personal and business expenses separate by using a different credit card for each is ideal. This will prevent any confusion, especially when it comes to doing your taxes.
What’s The Difference Between A Personal And Business Credit Card?
Understanding the differences between personal and business credit cards can help you choose the right financial tool for your needs:
| Personal Credit Cards | Business Credit Cards | |
| Purpose | For everyday personal expenses | For business-related purchases and expenses |
| Credit Limits | Typically lower | Often higher to accommodate business spending |
| Impact On Credit Score | Directly affects personal credit score | May affect personal credit score |
| Employee Cards | Not included | Optional with spending controls |
| Tax Benefits | Limited | Easier to separate and deduct business expenses |
How To Use A Personal Credit Card For Your Business
If you choose to use a personal credit card for business expenses, consider the following:
- Keep A Record Of All Business Transactions: Make sure to keep a detailed log of all purchases made for your business. In addition, keep all of the receipts and file them in an organized manner so that when it comes time to file your business taxes, you have everything you need to take advantage of all eligible tax deductions while complying with the CRA.
- Monitor Your Spending: Regularly review your credit card statements to ensure all business charges are legitimate and accurately documented.
- Avoid Maxing Out Your Card: Be mindful not to overspend on your personal credit card, as a high credit utilization ratio may negatively impact your credit score and borrowing capacity.
- Only Use For Small Expenses: Limit the use of your personal credit card to minor business costs or emergencies to avoid excessively mixing personal and business finances.
- Consider A Rewards Card: If you do choose to use a personal credit card for business purposes, consider applying for a rewards credit card that allows you to earn points for every dollar spent. Consider the earning rate for specific types of purchases that are more geared towards your business operations to maximize your points. For instance, a card that allows you to earn a lot of fuel or airfare points may come in handy if you travel a lot for business.
| Keep in mind: Using a personal credit card for your business may be suitable during the early stages of operation, but consider opening a separate business credit card once your company starts to grow and become more established. |
Using A Personal Credit Card For Your Business? Consider These Risks
As explained above, using your personal credit card to make business-related purchases can be a bad habit to develop. Here’s why:
1. High-Interest Debt
Both business and personal credit cards have interest rates of 20%+. If you’re using your personal card to float business expenses, you could end up spending a lot on interest charges. Some business cards offer a longer no-interest period compared to personal cards, making them more appealing.
If cash flow is a concern, you can consider applying for a small business loan and then discontinuing the use of your personal credit card, since it typically has a lower interest rate.
2. Tax Season Could Be A Nightmare
If you continue to use your personal credit card to make both personal and business purchases, tax season will be a nightmare. When you file your business’s taxes, you’ll most likely want to deduct your business-related expenses. If you used your personal credit card to purchase business expenses during the year, you could end up causing some serious tax issues. Failing to separate business from personal expenses could result in an audit.
Your personal income taxes and your business’s taxes are two separate things, so getting them mixed up because you only used one credit card is something to reconsider.
3. Your Personal Credit Could Suffer
By using your personal credit card to cover business expenses, you’re putting your own credit and financial future on the line. While your small business could be doing great right now (and hopefully it will continue to grow), you cannot predict the future.
Starting a small business and keeping it afloat is a challenging and risky thing to do. If your business falls into hard times, your own personal credit could suffer if you don’t pay your credit card bill on time. Furthermore, in the event that your business has legal issues because your personal finances are intertwined with your business’s finances, your personal assets could be at risk.
| Am I Personally Responsible For My Credit Card Debt, Or My Company? This depends on the type of business you’re operating. If your business is incorporated, for instance, you’ll benefit from “limited liability,” which means your business debts are legally separated from your personal debts. However, many business credit cards don’t work this way. With these cards, the liability is shared between the company and the person applying for the credit card. You’ll need to look at the credit card agreement to see if it notes “joint liability,” which means the charges on the business card are the responsibility of the company and the owner. |
Why You Should Use A Business Credit Card Instead
Having a business credit card specifically for covering business expenses is highly recommended, regardless of the size of your company. Here are a few reasons why:
1. Separate Your Personal And Business Expenses
This will make filing your personal and business taxes much easier and help you take advantage of tax deductions your business may be eligible for.
2. Take Advantage Of Better Credit Card Offers
Depending on the details of your business, you may qualify for a lower interest rate or higher credit limit on a business credit card.
3. Get Cards For Employees
If you have employees who are responsible for making business purchases, it would be easier to have them pay with a business credit to keep all business expenses consolidated.
4. Build Your Business Credit Profile
If you only use your personal credit card for business expenses and never set up a business credit card, your business will miss out on building its own business credit profile. A business credit card allows you to build on your business’s credit score.
Furthermore, having a business credit profile and a great business credit score will open up even more financial possibilities for you and your business in the future. Potential business lenders will want to see that you have a business plan and a profitable company, but they’ll also want to know that you can handle credit responsibly and appropriately.
Best Business Credit Cards In Canada
If you’re ready to apply for a business credit card, here are a few great options to consider:
| Card | Annual Fee | Interest Rate | Points |
| CIBC Aeroplan® Visa Business Plus Card | $120 (waived first year) | – Purchase rate: 19.99% – Cash advance rate: 22.99% | 1 – 2 points/$1 spent |
| BMO CashBack® Business Mastercard® | $0 | – Purchase rate: 20.99% – Cash advance rate: 23.99% | 0.75% – 1.75% |
| RBC® Avion® Visa Infinite Business | $175 | – Purchase rate: 19.99% – Cash advance rate: 22.99% | 1.25 Avion points/$1 spent |
| CIBC Aventura® Visa* Card For Business | $120 | – Purchase rate: 19.99% – Cash advance rate: 21.99% | 1 – 2 points/$1 spent |
| Scotiabank Passport™ Visa Infinite Business Card | $199 | – Purchase rate: 19.99% – Cash advance rate: 22.99% | 1.5 points/$1 spent |
| Business Platinum Card® From American Express | $799 | Charge card | 1.25 points/$1 spent |
| Scotia Momentum® For Business Visa* Card | $79 | – Purchase rate: 19.99% – Cash advance rate: 22.99% | 1% – 3% |
| TD® Aeroplan® Visa* Business Card | $149 | – Purchase rate: 14.99% – Cash advance rate: 22.99% | 1 – 2 points/$1 spent |
Learn more: Best Business Credit Cards Canada 2025
Can You Qualify For A Business Credit Card?
Some creditors may require that you show evidence that your business exists, such as a business license, financial statements, tax receipts, or partnership agreement. If you’re a sole proprietor and your business is under your name, you may also be eligible for some business credit cards without having to be a registered business.
Bottom Line
While a personal credit card might seem like the easiest and quickest option for small business owners to afford the daily costs of running a business, it’s not the best solution for everyone. A business credit card not only helps you build your business credit score, but it’ll separate your business costs, making it easier to file your business taxes. Alternatively, there are many convenient, quick and reasonable small business loans readily available to help you fund your business endeavours.
