Can I transfer my balance from a personal to a business card?
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Dear Your Business Credit,
I have two credit cards in my name that I use solely for my business use. The business is an LLC. Are there credit card companies that will allow me to transfer the balance from my personal card to a new LLC card? – Michael
Yes, it is possible to transfer the balance from a personal card to a business card, depending on the rules of the card issuers.
Although you can transfer personal charges to your business card, I would not recommend it. One of the top questions people ask me is to help them find a credit card for which they don’t have to personally guarantee the debt. If this is part of your motivation for wanting to move your personal debt to a business card, you will probably be disappointed.
For most small business cards, you have to personally guarantee the debt, so the balance transfer will not shield you from having to pay back what you owe – even if the business goes under. Business cards also lack some of the protections that consumer cards have under the Credit CARD Act of 2009.
Protections that come with a consumer card, but are absent from a business card, include:
- Consumer cardholders must get 45 days’ written notice for rate increases on new transactions.
- Consumer cardholders’ late fees are limited to $25 for a first offense.
Beyond that, moving personal debt into your business will make bookkeeping more difficult.
“If the transaction is entered correctly on your LLC books, the transfer, which in essence is a loan from the LLC to its member, will have to be carried on the books of the LLC as a loan,” notes Eric N. Klein, an attorney at Klein Law Group in Boca Raton, Florida. “If the transaction is entered differently, the additional debt that is now on the books of the LLC decreases the value of your business.”
Commingling your business and personal finances also can cause you to lose the protections from liability for which you set up the LLC. When you set up a business entity, it is to establish that you and the business are not one and the same – but that would be hard to prove if there are a bunch of personal charges on your business credit cards.
State laws may also complicate the balance transfer. You didn’t say what state you live in, but in Texas, for instance, the majority shareholder has to sign personally for a debt that is transferred from a personal card to an LLC’s card, according to Jim Angleton, president of Aegis Financial Services, an issuer of credit, charge and prepaid debit cards.
“Without having personal recourse language in the terms and conditions of the card agreement you will not obtain a card,” he wrote in an email. “However, if you collateralize your card with cash or allow direct debit of a bank account for timely repayment ... you will obtain a card.”
If you still want to go ahead with the balance transfer, I’d suggest asking the issuer of the new card if you are allowed to move personal debt onto it. The issuer will likely be familiar with any state laws that come into play with such transfers. But again, even if it is possible, I’d think twice about doing so.
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