Expert Q&A

Basic rules for business card usage


A reader who started her own company questions advice recommending that she use her business credit card for both personal and business charges

The content on this page is accurate as of the posting date; however, some of our partner offers may have expired. Please review our list of best credit cards, or use our CardMatch™ tool to find cards matched to your needs.

Sally Herigstad is a certified public accountant and the author of “Help! I Can’t Pay My Bills: Surviving a Financial Crisis” (St. Martin’s Press, 2006). She writes “To Her Credit,” a weekly reader Q&A column about issues involving women, credit and debt, for, and also wrote for MSN Money, and, and has guested on Martha Stewart Radio and other programs.

Question for the expert

Dear To Her Credit,
I am a sole proprietor. Other than for the obvious reason of organizing expenses, is it mandatory for tax reasons that I use separate accounts for personal and business use of credit cards and bank accounts? I ask because I was recently advised to use my corporate card for all of my expenses — both business and personal — as part of a strategy for keeping my personal credit score high. The reasoning is that since corporate cards are not reported on personal credit reports, my personal credit card “utilization” remains low. In other words, I am not constantly maxing out my cards and damaging my credit score.

It is also important to know that my business is currently in my own name — I have not incorporated yet. If I have a corporate card in my own name, won’t that still go toward my personal credit?  — Sarah

Answer for the expert

Dear Sarah,
Your intuition is correct. As a sole proprietor, your business card will affect your personal credit score. That only makes sense, because you and you alone are responsible for the account.

Putting all your debts on your business cards, even though they are owned by you, is similar to the idea some people have of keeping all their troubled or maxed-out credit accounts in one spouse’s name and the good accounts in the other’s. They may think they are gaming the system, but eventually they wish they’d spent more time keeping both credit histories in good standing instead of shuffling debt from one to another.

See related:6 questions to help you pick the right small business credit card, Business mistakes can appear on personal credit report, 5 things you should know about business credit scores, Small business credit card comparison chart

As a sole proprietor, there’s even less point in moving debts and other things reportable on your credit account between personal and business. As far as creditors are concerned, you are the business. In fact, putting all your expenses on one business card and pushing it close to the limit could hurt your credit score.

There are two reasons you should keep personal and business accounts separate and use them for their intended purposes:

First, having separate business accounts is one way to demonstrate to the IRS that you are a serious businessperson. This is especially important if there’s any chance the IRS could decide you have a hobby, not a business, and they disallow some of your deductions.

Second, keeping personal and business accounts separate simplifies tracking business expenses. Most people lose deductible expenses not because they didn’t know they could take the deduction, but because they weren’t organized and lost track of the deductible expense altogether. If you only put business expenses on your business card, it should be a cinch to categorize them and get all the deductions you have coming.

If you haven’t always kept expenses on separate cards, or if some expenses have crossed over from personal to business or vice versa, don’t worry. Keeping separate accounts is highly recommended, but not mandatory. As long as you track your business transactions and what they were for, you can still deduct them. One way to do that is to go through your statements every month with a highlighting pen and mark all your business expenses. Use a different color for other tax deductible items, such as charitable contributions you made on your credit card. Make notes for anything that is not self-explanatory, and then it’s easy for you or your accountant to categorize expenses correctly so you can get an accurate picture of how your business is doing and pay no more taxes than you rightly owe.

Editorial Disclaimer

The editorial content on this page is based solely on the objective assessment of our writers and is not driven by advertising dollars. It has not been provided or commissioned by the credit card issuers. However, we may receive compensation when you click on links to products from our partners.

What’s up next?

In Expert Q&A

Save 401(k) hardship withdrawals for true emergencies

You gave up total control over the account when you agreed to take the tax breaks, so weigh other choices before robbing your own retirement

See more stories
Credit Card Rate Report
Cash Back

Questions or comments?

Contact us

Editorial corrections policies

Learn more