Expenses you should never put on a business credit card

What are business expenses vs. personal expenses?

Business expenses are any purchases that pertain to the business’s operations and are “necessary and ordinary,” according to the IRS. This can include:

• Equipment
• Computers
• Inventory
• Business travel
• Mileage if you or your employees have to drive
• Cellphone services 
• Wifi
• Software subscriptions

You can generally get tax deductions for these expenses. If you use personal cards or cash to pay for them, your company should issue you a reimbursement, provided the charges meet the expense reimbursement policy. Many companies issue business credit cards to their employees so that they can use the cards to pay for business expenses directly. 

Personal expenses are any purchases that an individual makes that aren’t necessary to the company’s operations. It’s important to keep business credit card expenses strictly to business uses for a number of reasons that we explain further below.

Personal expenses vs. business expenses overview

Here’s a look at common types of expenses and if you should use a business or personal credit card for them, based on whether they’re intended for business or personal use.

Why keeping business and personal expenses separate matters

Keeping business and personal expenses separate is good for your business and helps you avoid potential problems. Here are the primary reasons why you shouldn’t put personal expenses on business accounts.

Legal and liability risks

A business entity, such as a limited liability company (LLC) or corporation, is legally separate from its owners and shareholders. This is a concept known as the corporate veil, and it protects individuals from personal liability if something goes wrong with their business. If your business goes bankrupt or faces a lawsuit, the corporate veil generally ensures that your own assets are safe.

For this protection to apply, the business and its owners must be completely separate entities. If you mix personal and business expenses, a court could rule that there’s no business entity separation, since you’re using its money as your own. The court could then “pierce the corporate veil,” an expression for holding the owner responsible for a company’s debts.

If you use business credit cards for personal expenses, you could lose corporate veil protection and be personally liable for business debts. This is general information and not legal advice. Consult an attorney for guidance about corporate structure and liability.

Tax compliance issues

When you have personal expenses on a business account, it’s harder to keep track of tax write-offs. This creates the risk of miscategorizing transactions and claiming personal expenses as tax-deductible business expenses. Accurate expense categorization is a crucial part of business tax preparation and filing.

If the IRS audits your business and finds that you claimed a personal expense as a business deduction, it will disallow the deduction. You’ll need to pay the original taxes and interest on the unpaid amount, dating back to when the tax was originally due. The IRS may also apply an accuracy-related penalty of 20% of the underpayment.

Credit score and financial impact

Because credit limits for business credit cards can be much higher than personal credit cards, cardholders may be tempted to overspend for personal use. If this leads to payment issues, it could affect the business’s credit score. In addition, many business credit cards report to the major credit bureaus, which means that overspending can impact the cardholder’s personal credit score.

That means late payments could cause a drop in your personal credit score and your business credit score. Even if you pay on time, carrying a large balance increases your credit utilization –y our credit card balances divided by your credit limits. High credit utilization is another issue that can decrease your credit score.

Which expenses should never be charged on a business credit card?

There are several personal expenses that you, your employees, or your shareholders should almost never charge to your business credit card. While it may seem like making these big purchases to earn business credit card rewards is a smart move, the interest rates for credit cards are generally much higher than other forms of business financing. In many cases, the major credit card issuers – like Visa, Mastercard, or American Express – won’t let you pay for these expenses with a corporate credit card or consumer credit cards, anyway. 

You should avoid using your business expenses credit card for the following transactions.

Mortgage or rent payments

In almost every case, you shouldn’t charge your personal mortgage or rent to a business credit card. Most mortgage companies don’t accept credit card payments in the first place, and rental properties normally charge an additional fee if you pay by credit card.

To clarify, paying rent for a business office with your business credit card is perfectly fine. Your own housing payment is a personal expense and shouldn’t go on a business card. However, you might be able to deduct a portion of your housing costs using the home office deduction. This tax deduction is available if you use a portion of your home exclusively for business on a regular basis.

Payroll and employee compensation

Business credit cards are intended for purchasing goods and services, not sending cash. Most businesses don’t use credit cards directly for payroll. While some third-party services let you pay employees with a card (for a processing fee of typically about 3%), using those services may raise tax, reporting, and fee issues.

Dedicated payroll services are a better option to pay your employees. They handle tax compliance, calculating withholdings, and filing the appropriate tax forms. Payroll services also have much more affordable fees than you’d pay using a credit card.

If you’re looking for a way to finance payroll, a business line of credit (LOC) is a popular choice. LOCs normally have lower interest rates than business credit cards, and some payroll services let you set up a LOC as your payment method. Another option is invoice financing, where you get short-term funding using unpaid invoices. This can work well if you’re having cash-flow issues because of your clients’ payment timeframes.

Personal travel and vacation expenses

If you travel often for business, you may piggyback your personal vacation time onto your business trips. But it’s important to keep your personal travel expenses separate from your business travel expenses.

On business trips with personal time mixed in, keep detailed records of your business expenses. Expense tracking apps for small businesses can help with this, allowing you to scan receipts and categorize each transaction. Tracking business expenses as you go is easier than trying to separate business and personal expenses after the fact, and it’s what the IRS recommends, providing guidance that “a timely kept record has more value than a statement prepared later.”

The IRS also advises that business owners must provide a written statement of the business purpose of an expense, unless the proof is clear based on the surrounding circumstances. For example, if you stay at a hotel for a business trip, you may not need to include a statement about why a taxi to and from the hotel is a business expense. If you’ve already justified the hotel and the business trip, then it’s clear you’ll also need transportation to that hotel. But when in doubt, include a statement with the business purpose of your expense.

Sometimes employees choose to pay for business travel using their own personal rewards credit card and get reimbursed by the company so that they can earn travel rewards points for their personal use. This is a perfectly acceptable way to pay for business travel, as long as your expense reporting and expense management systems are set up for it. It’s better to keep the company credit card out of the equation if there could be any chance for misuse or confusion. 

High-risk investments and trading

It’s never a good idea to use business funds to pay for high-risk investments. Stocks, cryptocurrency, foreign currency (forex) trading, and speculative ventures are all examples of investments that carry too much risk to be on a small business’s balance sheet. If the investment fails, your company will be left footing the bill.

Using a business credit card to buy stocks or for trading is generally out of the question. For the most part, brokerage firms won’t let you use a credit card – personal or business – to fund your account.

You may decide to use a business credit card or other forms of financing for business investments, such as equipment or a new location, which is a different type of investment. Business investments generate a return, often by increasing productivity or sales. Financial market speculation, on the other hand, is the purchase of an asset with the expectation that the price will rise.

Personal medical expenses

Healthcare is a big expense for most individuals in the U.S., and even with a company covering the cost of insurance, those bills add up. But it’s not a good idea to use your business credit card to pay for personal medical expenses. You’ll be turning your personal expenses into business debt.

Personal credit cards or health savings account (HSA) cards are a much better way to pay for personal medical problems. You could, however, elect to pay for business health insurance premiums with a business credit card, if the option is available. Since those premiums are a business expense, there’s nothing wrong with putting them on a business card.

Personal legal fees

You shouldn’t use your business credit card to pay for personal legal expenses. Once again, it’s important to keep personal issues and business issues separate to avoid commingling funds and jeopardizing your legal liability protections. Only use your business card to pay for your company’s legal fees.

For example, divorce, estate planning, and personal injury are all personal legal expenses. If you hire legal assistance for business matters, such as business formation, contracts, incorporation, or employment law, then paying with a business card is appropriate.

Cash advances

A business credit card cash advance can be problematic for several reasons. It’s impossible to prove you used the cash for business purposes and justify a tax deduction. Cash advances are also expensive. Issuers normally charge a cash advance fee, with 5% being the standard amount. Cash advance interest rates tend to be higher, often over 25%, and unlike purchases, cash advances start accruing interest immediately.

If your business needs cash, there are better ways to borrow. Business LOCs and short-term business loans will likely have much lower interest rates than you’d get with a cash advance.

Expenses you should charge on a business credit card

Using your business credit card for business purposes is an excellent way to help improve your business finances and cash flow and earn rewards. In fact, many business credit cards have rewards programs and perks just for normal business expenditures, like international travel, advertising, and office supplies. Credit cards can also offer consumer protections for business purchases that using cash won’t. 

Here are some things that you should consider charging on your business expenses credit card.

Advertising and marketing costs

A business credit card is a great way to turn advertising and marketing spending into rewards. Many business credit cards offer bonus rewards of 2x to 3x points specifically for advertising spending on social media or search engines. You can also pay by card for marketing tools, email platforms, social media management tools, and ad agencies.

It’s easy to set up recurring payments with a business credit card. You can add it as your default payment method so that your ad spending gets paid automatically every month.

Business software and subscription services

Business software and subscription services normally accept credit cards. This provides another opportunity to just set it and forget it with an automatic monthly or yearly plan, while earning cash back or points on these purchases.

Here are some examples of recurring software and subscription expenses you should pay for with a business credit card:

• Software as a service (Saas) tools, such as Microsoft 365 and Adobe Creative Cloud
• Accounting software, such as QuickBooks and Freshbooks
• Project management platforms, such as Trello and Jira
• Customer relationship management (CRM) systems, such as Salesforce and HubSpot

Vertical SaaS companies that design industry-specific software also typically accept credit cards. If you have a law firm that uses Clio, a property management company using DoorLoop, or an HVAC business with a Jobber subscription, use your business credit card to handle the recurring payment and earn rewards.

Office supplies and equipment

Whether you have a home office for your business or a commercial location with a dozen employees, you can and should put your office expenses on your business credit card. You can use your business card to pay for major equipment, such as office furniture, computers, a printer, and any other technology your company needs. Business cards also work well for everyday office supplies, including paper, pens, staples, and whatnot.

In addition to convenience, business credit cards offer a few other valuable perks on these types of expenses. Some of them offer bonus rewards at office supply stores, so you earn even more back. Many business cards also have purchase protections and extended warranty coverage, which can come in handy if office equipment gets damaged or breaks down right after the manufacturer’s warranty ends.

Business travel and entertainment

Business travel expenses can be tax-deductible if you’re traveling away from home for duties related to your business, profession, or job. You can deduct ordinary and necessary business travel expenses, including your:

• Flights and other transportation costs, such as taxis
• Hotel/lodging
• Rental cars
• Dry cleaning and laundry
• Conference and convention fees if they relate to and benefit your business

The IRS watches out for business owners trying to claim personal travel as a business expense, so it’s important to properly document business travel expenses. Record your travel expenses and note the business purpose of these costs to ensure you can justify them if needed.

A business credit card can help you keep your travel expenses organized, and many cards have useful travel benefits, too. Quite a few business cards have no foreign transaction fees, which is practically a must if you travel internationally. There are also travel cards with complimentary travel insurance and even access to airport lounges.

Tax laws regarding deductions for meals and entertainment have both changed in recent years. As of the 2026 tax year, certain employer-provided, on-site meals and other categories have changed — while client/travel meals generally remain 50% deductible, employer-provided cafeteria/onsite meals face new limits. Tax rules change often; consult the IRS or a tax advisor for your situation.

Entertainment is no longer tax-deductible, as the Tax Cuts and Jobs Act (TCJA) of 2017 eliminated this deduction. You can still pay for these expenses with a business credit card and earn rewards on them. Just make sure you don’t deduct entertainment expenses and that you deduct the correct amount for your business meals. 

Inventory and raw materials

Product-based businesses can use business credit cards for inventory purchases, wholesale goods, and manufacturing materials. Not only does this allow you to earn rewards on your orders, it can also help with cash flow. You can pay for inventory on credit, and then pay off the purchase when your sales revenue comes in.

This strategy works best with business credit cards that offer a 0% intro APR or an extended payment plan. You’ll be able to finance your upfront costs at a reasonable interest rate or with no interest at all during the 0% period.

Large business purchases with intro APR offers

If you have a major business purchase coming up, you may consider getting a new business credit card to take advantage of intro APR offers. Many business cards offer a 0% APR for a certain period of time, generally anywhere from six to 18 months. You could use a 0% intro APR to finance all kinds of expenses, such as:

• A bulk inventory order for the holiday season.
• New equipment to expand your business.
• Large-scale marketing campaigns to attract more clients.
• Technology upgrades for your workstations.

There are a few things to remember if you use a 0% intro APR business card. You should pay off your balance before the intro period ends, because the APR will increase significantly after that. Set a spending limit so that you don’t take on too much debt and have trouble paying it back. Make sure you always pay your bill on time, as well. The issuer can charge you a late fee if you miss a payment, and in some cases, late payments can even lead to the issuer revoking your card’s 0% intro APR.

If you follow that advice, a 0% intro APR card can be one of the best options for dealing with large purchases. It’s cheaper than a high-interest loan, and you won’t have to deplete your cash reserves.

Business credit card use best practices

Having systems in place can help you prevent business credit card misuse. Here are the best practices to follow when using a business card and issuing employee cards.

Create a clear expense policy

When you issue company cards to employees, you’re generally responsible for any charges they make. A corporate credit card policy is a must to set clear boundaries and expectations on company card usage.

Your expense policy should cover what types of purchases employees can make with their cards and what’s prohibited. For example, if your employees need to drive to job sites, your expense policy could list gas stations as an acceptable expense. If your employees handle orders for the office, then office supply stores and websites would likely be another acceptable use of the company card.

While there are probably many types of purchases you won’t want employees making with their cards, it’s a good idea to mention some of the most common examples. You may clarify you don’t want company cards used at restaurants, entertainment venues, or hotels. You can also set limits on how much employees can spend during specific time periods and on any single transaction, and explain that any transactions that would exceed these limits require your approval first.

Put your expense policy in writing and get a signed acknowledgement from every employee with a company card. Your policy should also explain that company cards are only for business expenses and not personal expenses.

Track and categorize every purchase

Real-time expense tracking is a critical part of managing your business credit card. It keeps you informed about how much your business is spending and where employees are using company cards. If there are any issues, you can correct them promptly. Many business accounting softwares let you connect your business credit card and automatically sync transactions, so they show up right away.

Accounting software and expense management tools can also make receipt management easier. After a purchase is made on a business card, these apps prompt you to take a picture of the receipt. The photo is stored digitally and automatically matched to the corresponding transaction.

As you track expenses, merchant category codes (MCCs) are a convenient way to automatically categorize them. An MCC is a four-digit code that identifies the type of goods or services provided by a business. Instead of categorizing everything yourself, you can let your accounting software group transactions based on their MCCs.

Reconcile statements monthly

Tracking expenses in real time is smart, but you should also do a more thorough monthly review where you take an in-depth look at your statement. Here’s step-by-step guidance on how to do this:

• Review all transactions for the statement period.
• Match receipts to their corresponding transactions.
• Verify the business purpose of every charge.
• Flag any errors, unauthorized charges, and questionable charges.

Timely reconciliation of your business expenses is key. It’s harder to evaluate questionable transactions and verify the business purpose of each expense if you wait too long. By doing this on a monthly basis, you’ll be able to ensure accurate financial reporting and record all the information you need for your tax preparation.

What to do if you accidentally charge personal expenses

If you accidentally charge personal expenses to a business credit card, don’t panic. Occasional honest mistakes are fixable and are much different from intentional misuse.

The right solution depends on how quickly you catch the mistake. If you haven’t paid your credit card bill yet, you can simply make two separate payments. Pay the personal expenses from a personal bank account and the business expenses from a business bank account. Exclude the personal charges and payment from your profit and loss (P&L) statement.

If you’ve already paid your credit card bill, you can mark the charge as a personal expense or an owner’s draw. Make a deposit for the exact amount of the expense from your personal bank account to your business bank account, and categorize the deposit as an owner’s contribution. This shows in your accounting records that you reimbursed the personal expense. Consult a tax advisor for the right plan for your needs.

In either case, you should make a brief memo documenting any accidental personal expenses charged to your business accounts. Include the amount, the date of the charge, and the date when you reimbursed the business. Being transparent about these mistakes can help maintain the corporate veil.

The bottom line

All businesses should enact policies to keep personal expenses off business credit cards. Strict separation of your personal and business finances will maintain the legal protection provided by the corporate veil and help with tax compliance. You’ll also better protect the credit health of your business by avoiding personal debt on your business card.

If you don’t have a business credit card already, sign up for Nav to find the best option for your business’s needs. Once you have a business card, set up an expense policy for you and your employees to follow. Decide which types of expenses are suitable for your business credit card, and which ones aren’t. Most importantly, make sure every transaction that goes on your card has a clear business purpose.

Frequently asked questions