Should you use your personal Credit Card for your business needs?

Personal Credit Cards are helpful for people across income groups. With high credit limits, a Credit Card can help you purchase the things you desire and pay back the money at a relaxed pace, without having to drill a hole in your pocket. Also, most Credit Cards offer high credit limits. But regardless of these limits, a Personal Credit Card is only suitable for your personal use and not for other kinds of expenses.

Self-employed individuals, small business owners, freelancers, etc., often find it confusing and challenging to draw a line between their personal and professional expenses. For the sake of ease, they end up using the same Credit Card for their personal as well as business’s needs. However, this may not be the ideal approach.

It is never advised to use your Personal Credit Card for your business needs. Here’s why:​​​​​​​

1. A Personal Credit Card has a lower credit limit than a Business Credit Card

A business can require massive amounts of funds for expensive machinery and equipment, office renovation, lease or rent, etc. These costs can pile up to a considerable amount that can be hard to cover with your Personal Credit Card. No matter the credit limit on your Personal Credit Card, it can never match up to the credit limit of a Business Credit Card that is specifically designed to match the needs of a growing business.

2. Using a Personal Credit Card for your business needs will impact your credit score

Using your Personal Credit Card for business transactions reflects on your individual CIBIL score. If you are unable to clear your Credit Card dues, your personal credit score will be negatively impacted. This will further affect your loan eligibility when you apply for a loan for your personal needs. You may have to pay high interest rates on loans or may not even qualify for a loan at all, depending on how low your credit score is.

3. A Personal Credit Card cannot be used by employees

A lot of businesses allow their employees to use the company’s Credit Card to cover various work expenses, like travel tickets, hotel bookings, purchase of office supplies, food, etc. If you do not have a separate Business Credit Card, you may be forced to share your Personal Credit Card with your employees. Not only can this be extremely unsafe, but it can also cause a lot of confusion. Furthermore, using one card for multiple needs makes it hard to keep track of all expenses. A Business Credit Card, on the other hand, can offer a lot of ease and convenience when used specifically for your business expenses.

4. A Personal Credit Card may not offer business-specific rewards and bonuses

Every type of Credit Card is specially designed to offer you the best possible deals for your needs. For example, you can earn rewards on dining, shopping, groceries, etc., by using a Personal Credit Card. On the other hand, a Business Credit Card will offer you rewards like airline discounts, rewards on hotel bookings, business services, airport lounge access, etc. These rewards can help your business save money on various heads.

5. A Personal Credit Card cannot help you build a business credit history

Having a business credit history is essential if you need to apply for different types of business loans, equipment leases, etc. Investors and lenders always check your business’s credit history before sanctioning any funds to gauge risk and establish trust. If you use a Personal Credit Card for your business’s needs, you will have a personal credit history and not a business credit history. This can make it hard to get funds for your business at a later stage.

Considering the above reasons, it is wise to obtain a Business Credit Card to manage your business expenditure.

What are the benefits of using a Business Credit Card?

A Business Credit Card like the HDFC Bank Business Credit Card can offer many benefits, such as:

1. Extra savings on all essential business purchases like telecom, utility, government and tax payments
2. Savings on fuel purchases
3. Bonus savings on business purchases through the year
4. Prepaid cards for employee expenses and payments
5. CashBack on wholesale and business purchases via HDFC Bank Smartbuy
6. Hotel and flight bookings for business travel with Smartbuy

You can read more about the benefits of a Business Credit Card here.

To sum it up

Every type of Credit Card serves a unique purpose. Hence, it is important to only use a Credit Card for the reason it is made for. A Personal Credit Card can offer many useful features, CashBack offers, and rewards for your personal use. But it may not be the ideal option for your business’s needs. So, get yourself a Business Credit Card and simplify your finances.

HDFC Bank offers great business solutions that can help your business grow. Check them out and expand your business today!

To apply for a Business Credit Card, click here!

*Terms and conditions apply. Credit Card approvals at the sole discretion of HDFC Bank limited. Credit Card approvals is subject to documentation and verification as per Banks requirement.