How to Use a Personal Credit Card for Business: Full Guide for Beginners

You are starting or growing your business, and the first question is naturally – credit. Can you use your credit card to start your business? Should you, what are the best practices, and how does it affect your business and credit score? And what are the benefits of opening a business credit card instead?

Let’s dive in with the main info right away.


Can I use my personal credit card for business purposes? 

Yes, you can. If you are starting a business, you probably wonder if you can simply use your personal credit card for business purposes. And it does seem simpler to use one credit card for your life. But there are things you need to be aware of. And let’s sort this out quickly – the cons outweigh the pros. 

But if you want to use it, let’s find out the best way to do it and the main differences between a business and a personal credit.

As a business owner, you must understand the difference between personal and business credit cards. That also means different personal and business credit scores.

 So, it’s not only about two different cards. They have big economic and legal differences.

We will answer some general questions at the start.


What even is a credit card?

It’s a payment card that allows you to pay for products and services now with the credit – later. You get the means or the money now, and it is required to be paid back in the future, usually by monthly payoffs.

When you use your credit card, you need to make sure your return payments are made every month by the stated due date. The amount you are allowed to spend is called credit.

P.S. Learn all about the credit lingo and net 30 vendor account terms in our complete guide to net 30 vendor account terms for beginners!

#Tip 1: Before you even apply for a certain card it is useful to know that different credit cards offer different rewards, points, or benefits. Don’t be hasty and go with the first option. Look into several banks.

Personal credit card - how to use it for business expenses


What is my personal credit?

The name says it – it is your personal financial history that shows how responsible you are with your personal finances. For example, do you pay your bills on time, and are you in debt? It ultimately creates a personal credit score you need for loans and credit cards. Business credit is the same thing but with the financial history of only your business.

How you pay for things – on time and in full, influences your personal credit score.

A personal credit score usually ranges from 300 – 850, depending on the credit agency and model, from worst to best.

The higher the score – the more reliable you look and have better lending opportunities. 

When you apply for credit, the lender will most probably check your FICO (Fair Isaac Corporation) to find out your personal score. 

It’s a summary of your credit history through a number of 3 digits. Your number is determined by how good your credit report is. The higher the number, the better because that means you can borrow more or have more time for repayments and better terms. 


How can I check my personal credit? 

No worries if you don’t know your personal credit score. There are more ways to check it by yourself and for free:

  • Normally you can request it free of charge from one of the main credit reporting agencies. That’s usually Experian, Equifax, or TransUnion.
  • You can also search for free credit scoring websites, there are many options online. 
  • There is a good chance that your credit card provider offers the service of checking your credit score for free. You can get in touch directly with your bank and ask.
  • You can also check with a credit counselor who offers this among other services for people who need help managing money or debt.


How to interpret my personal credit score once I get it?

There is no one rule because it depends on the model and the credit bureau. Depending on the number it can be interpreted as bad, average, good, very good, and the best. Typically, anywhere from 670 (using the FICO model) is a good credit score.

#Tip 2: You should check your credit score every year and work on ways to improve it through fiscal responsibility. 


What’s the difference between personal and business credit scores?

 The business credit score is similar to a personal business score. It also factors in how you make your payments and handle your financial responsibilities, but on your business accounts.

The main differences between a personal and business credit score are:

  • personal usually ranges from 300-850, whereas business ranges from 0 to a 100
  • your personal credit score is private, and your business credit score is public
  • a personal credit score connects to a social security number, a business credit score connects to your Employee Identification Number

So, now that we have covered the basics let’s look at a personal credit card and score as a way of handling your business.

What is the difference between a personal and business credit card


Personal credit card – can you use it for business? 

A personal credit card means it is in your name. You get it through your bank for your personal expenses. The better your personal credit score is, there are more credit cards you can qualify for.  And yes, it is legal to use that card for business purposes as well. 

Yet, this is usually only practiced if you are the sole proprietor of your business. Even if you are using a personal credit card for business, you should have a specific card for it.

P.S. We’ve prepared a complete guide on net 30 payment terms, so make sure you don’t miss it if you use your credit card!

So, if you have more than one personal credit card, you could start using one for business expenses for your LLC. It is the only way to differentiate your personal from your business expenses. Many will argue that you definitely shouldn’t use your personal for business, but there are some small pros to it. Let’s check them out.

#Tip 3: Even if you use your personal car for business, you must separate your personal expenses from your business-related expenses. That means separate cards for separate purposes.


Reasons why you might be urged to use a personal credit card 

Here are the two main reasons you might want to use a personal credit card.


1. It can help you grow your personal credit score.

If you pay everything on time your personal credit score improves. That translates to a higher credit limit. 

This is also important when you do want to apply for a business credit card. Small business credit cards usually look at your personal credit to see if you have a good personal guarantee. 

By building your personal credit score, you can have a better choice of business credit cards. 

But you can also hurt your personal score by having many business expenses on your personal card. Remember, you are not building your business score, just your personal one.


2. It’s easier at first.

It probably seems easier just to use your personal card for your business and avoid the hassle of applying for a business card or you can’t qualify for one. 

Yet, taxes, legal procedures, etc will be much more complicated and harder to track. 

There are many benefits to using a business credit card instead and will get to those right after this. But if you decide to use a personal credit card for your business first, here are things to keep in mind.


How to use a personal credit card for business – 4 helpful tips

Here are the 4 best tips for using your personal credit card for business expenses.


1. Have at least two cards to use a separate card for your business expenses.

If you mix your personal and business expenses you will quickly have a problem, especially come taxes time. In case of an audit, it will be difficult for you to prove that your business-related expenses are for your business.


2. While your personal credit card can help your credit score, it can also damage it.

Pay your payments on time. And only place those expenses that you know you can pay off. That way you can help build your personal credit score. With this in mind, it is not a good idea to use a debit card for your purchases. Hotels and similar expenses can place a big hold on your card that can cause damage to your credit.


3. Be careful about your credit limit and the amount of debt ratio.

You need to be careful about the amount of debt versus your credit limit, which is called the credit utilization ratio. Some say the CUR should be below 30%. And that includes your personal expenses because all debt counts.

To calculate your credit utilization ratio, you add up balances on all your credit cards. Then you add up the credit limits on all your cards. You divide the total balance by the total credit limit. Finally, you multiply it by 100 to get your percentage.


4. Keep track of your growth and act accordingly.

If your business grows and you have other employees, it is not a good idea to keep using a personal card for your business. Also, your expenses might change quickly, and then a business card can offer you more rewards and benefits. Keep track of how your business changes and switch to a business card before you do some damage. 

Personal credit cards won’t help you build your business credit. They can help build your personal credit but also damage it. They also aren’t practical in the long run and don’t provide the same rewards and perks tailored to small business owners.

Now that you know what to be careful about when using a personal card for your business. Let’s see why the majority favors using business cards from the start and what the benefits are.


The main benefits of using a business credit card for your business instead

Learn all about the main benefits of using a business credit card for your business (instead of a personal credit card).


1. It’s more practical.

Nowadays most payments are online, and your business credit card makes it easy to buy equipment or pay for services for your company. This way you keep track of your expenses, and you have a higher limit and better advantages because it’s a business credit card. It’s also easier and faster to get a business card than a business loan.


2. It’s safer.

 It is easier to have legal protection when you separate your personal and business expenses. You do so to protect your personal assets in case of a legal matter. Also, it is way easier to keep track of your finances, taxes, and accounting if you separate them. Good bookkeeping is important.

You can also provide cards for your employees if they need to travel for business or have certain business-related expenses. You can easily keep track of their spending and limit the amount available. 


3. You get better terms and perks.

 With a business card, your limit is higher than with a personal one. Many business credit cards also offer different perks: points, rewards, discounts, or miles.

When you use a business credit card and meet the minimum spending requirements, you usually get a welcome bonus. There are also specific rewards for business-related purchases such as equipment or advertising. You can collect points and miles on those expenses or cash-back rewards. There are many other benefits tailored to a business credit card that doesn’t exist when you use a personal credit card.


4. You build your business credit score. 

This is probably the most important one. A good business credit score is crucial for your business growth and goals. Using a business credit card and paying invoices on time helps you build your credit score faster. 

Your business credit is separate from your personal one. When you grow and need a loan or a line of credit, banks check your business credit score. The better the score, the better the terms you will get. 

But, your vendors need to connect your transactions to a credit reporting agency. You can do that here at the Red Spectrum by signing up for our net 30 vendor account. We open it and connect your report to build your credit score fast and easily!


Bonus: Can you use your business account for personal expenses?

In short, no. It’s illegal. A personal credit card can be used for business purposes, but not the other way around. Your business credit card is for business only. If you use it for personal purchases, you violate the agreement for the account.

Now that we covered the right way for you to start your business, you probably wonder how to get or apply for a (business) card. There are many options, depending on your credit score. You will want it on a good level, above 670 through FICO. If you first want to get your credit score higher, you can use our Business Builder.

The application for a business card is the same as a personal one, meaning you go to a bank, open an account and request a card. But to get a business credit card, you will also need:

  1. A personal employer identification number or EIN with your personal information.
  2. Business information includes name, address and phone number, opening year, and owners or shareholders. 
  3. The category of your business together with business revenue information and monthly expenses.

Once you submit all the info, the bank will issue you a card within a week or two, and you are good to go.

Once you have your business credit card, you can start your growth and build your business credit. 

Here at The Red Spectrum, we offer different products that every new business needs so you can check them out. The best part – on every purchase you make we open your Net 30 vendor account and help you build your credit score faster!

Grow your business with us.

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