Can I use my company payment card for personal expenses? (2024)

Whether you're new to the business or have been an entrepreneur for years, you may be wondering, "Can I use my debit card for personal use? After all, it's my money." 🤔

Plus, as a small business owner, it's easy to blur the lines between personal and business expenses. When can your company pay for your morning coffee, and when should you pay for it with your own money?

Let's take a look at how and when to use your business payment card – and what the risks are if you use it incorrectly.

In this article:

• 💰Why should personal and business expenses be separated?

• ⛔️Risks of mixing personal expenses with business expenses

• 💳 When should you use your company payment card?

• 📄 Miniquiz: Should I use my company payment card for personal use?

• ⬇️ The end result

💰Why should personal and business expenses be separated?

When you first start a business, it can be tempting to combine your personal and business finances. After all, when you are the sole owner of the company, it is easy to think that they are interchangeable. However,mix personal and business expensesis not only messy: it can also have legal consequences.

Simply put, when you combine your business and personal finances, you're essentially treating your business like a personal piggy bank. 🐷 And while it's not technically against the law to make a personal purchase from your business account, doing so can lead to major tax, accounting, and compliance issues.

On the other hand, when youdifferentbusiness and personal expenses, you'll gain a clear understanding of your finances – and protect your business from future tax and legal complications. 🙌

Business Banking that keeps you on top of your money No account fees. 20 checking accounts. Savings with 1.00%-3.00% APY. 50 virtual payment cards. Apply 100% online.Try RelayTry Relay⛔️Risks of mixing personal expenses with business expenses

When you use your company payment card (when youshoulduse your personal payment card) you are putting yourself and your business at risk.

If you've already mixed your personal and business expenses, don't panic. Remember that by reading this article you are already taking the first step towards better money management. 🙌 Additionally, by becoming aware of the risks below, you can make informed decisions about future consumption.

⚖️Legal complications

As previously mentioned, from a legal perspective, you are not breaking any specific law if you use your business debit card for personal use.

But when youopened a business checking account, you have signed a contract with a card issuer or account provider. This contract almost certainly included a clause about using your business card for personal expenses.

By purchasing anything that is not for your business with a card intended for business expenses, you are violating this contract. This could get you into legal trouble.

In addition, if your business is a limited liability company (LLC) or a corporation, you are entitled to certain protections for your personal assets if your business goes bankrupt or is taken to court.

However, you may lose this protection by "pierces the corporate veil." This means that when you use your company's money for personal expenses, you could be putting your personal assets at risk in the event of a lawsuit or bankruptcy. 😬

🔎Lack of insight into cash flow

Understanding your business's cash flow can help you make informed, strategic business decisions. However, if you always make withdrawals from your company's funds for personal use, it will be much more difficult to get a clear picture of your company's financial health.

Blurring the lines between personal and business expenses not only hinders your understanding of your financial health, it can also put you over budget and into a cash flow crisis. When you spend company money on personal items, you may accidentally eat cash intended for your company's operating expenses, savings, or labor costs.

💲 Messy accounting

The main reason why many business owners choose not to combine their personal and business expenses is that it creates an accounting nightmare. 💭

When you use your business card for personal purchases, your books become full of irrelevant transactions, making it challenging to keep accurate records. And when tax season rolls around, sorting through all those jumbled transactions can be a huge headache. 😓

💸 Tax time drama

That brings us to taxes. If just the thought of tax season makes you nervous, the idea of ​​combining business and personal transactions might make your skin crawl.

Business owners must use their expense reports, profit and loss statements, and other financial documents to file their taxes. But if you've been making personal purchases all year, you'll find that it takes hours ⏱ to figure out which transactions were personal and which were business-related.

Even if you spend days categorizing your expenses, you can make costly mistakes. If you claim a business expense as personal, you could lose the statutory tax deduction, or worse, get into tax trouble if you claim a personal expense as a business write-off. 💰

🤵 Preparing for audits

Suppose an audit comes along and the inspector discovers that you have made personal purchases with money from your business bank account. Of course, you haven't done anything illegal, but potential investors and business partners may think twice about doing business with you and your company.

It is critical that small businesses be ready for an audit at any time, whether by the IRS, a potential investor, or another third party. The best way to stay prepared? Save your business card for your business needs and you're done. ✅

💳 When should you use your company payment card?

All these rules and warnings may seem like no fun, but they are essential to running a professional, legal and profitable business. So if you can't use your business debit card for personal use, when is the right time?

Here are some types of expenses you can pay with your debit card.

1. Recurring payments🔄

You can make any business payment that takes place at regular intervals with your business payment card. Examples of these recurring payments are rental payments (for your office), energy and telephone bills and software subscriptions.

2. Daily business purchases 📝

Do you need a new stapler? You can – and should – use your business debit card for things like office supplies, printing costs and other expenses directly related to running your business.

3. Business trips and customer meetings ✈️

When you're traveling for business, it's always a good idea to use your business payment card for expenses related to the trip, such as flights, hotels, and meals with clients or partners. Be sure to keep all receipts and record the purpose of each expense. 📃

4. Personnel costs 👷‍♀️

If you have employees who regularly make business purchases and need reimbursem*nt, business debit cards can simplify the process. For example, with Relay (that's us! 👋) you can issue up to 50 virtual or physical Visa® debit cards.

You can issue individual payment cards to employees, teams or specific spending categories. This will simplify enormouslypersonnel cost management-no more last-minute expense reports or employee reimbursem*nts.

Moreover: problemvirtual business payment cardsYou give your team an overview of your consumption in real time. You can immediately see whether an employee uses the company payment card for personal use. You can then freeze or lock their payment card via your Relay mobile app. This makes business expenses more convenient and secure. 🔐

📄 Miniquiz: Should I use my company payment card for personal use?

Using your business payment card for personal use can pose serious risks. To help you make sure you're using your business card correctly, we've created a mini quiz to test your knowledge. 📝

Let's look at a brief history of a hypothetical business owner named Beth. During Beth's busy daily life, she makes many purchases. See if you can choose which purchases you make from herpersonal payment cardand what should be done with herbusiness card! ⬇️

Beth starts her day by going to her favorite local coffee shop,to buy a cup of coffee☕️ to herself, and opens her email. She looks at her work agenda, but notices that her subscription to the agenda software is about to expireextends his subscription🗓.

In the morning, she works on organizing some data for her organization before heading to a company-sponsored lunch event. Afterpay the restaurateur🥯 During lunch and enjoying the meal, she goes to the photo shoot room, where her organization offers new portrait photos to all employees.

Wearthe new blazer she bought👩🏽‍💼 for her portrait photo, she's more likely to get a perfect photopays the photographer📸 for their services.

Check your answers below!

Annnnd time! Let's see.

• First Beth bought a cup of coffee. She may have worked while enjoying the coffee, but it is not a mandatory or necessary purchase to run her business, so the purchase must come from her personal account. ❌

• But since her calendar subscription is used for work, this counts as a business expense. ✅

• Plus, meals and entertainment for business purposes are legitimate business expenses, so she can pay the caterer with her business account too! ✅

• Although her new blazer looks great on her, it was unfortunately not necessary to run her business. She has to pay for it with her personal credit or debit card. ❌

• Last but not least, the photographer's payment is strictly work-related, so it can be paid with her company's credit or debit card! ✅

⬇️ The end result

Now that you know the do's and don'ts of using your business debit card, you're ready to handle your business expenses like a pro. Keep personal and business expenses separate, use your business payment card for the right purchases and keep your administration clear.

✅ Instantly issue 50 business payment cards with Relay

Relayis an online banking and money management platform that allows small business owners to open multiple, free checking and savings accounts. Relay also allows you to issue 50 virtual and physical payment cards to keep your budget in check and keep track of team costs.

Here are just a few reasons why small business owners love using Relay for their business banking (and debit cards):

• ✅20 free business checking accounts: Relay does not charge overdraft fees, maintenance fees and does not require a minimum account balance. This means you can easily organize your money across multiple accounts (such as profit and operating expenses) and become crystal clear about earning, spending and saving.

• ✅ Automatic savings:With Relay you can add more breathing room to your budget with automatic savings. Plus, you'll earn 1-3% APY* on every dollar.

• ✅50 physical or virtual payment cards: With Relay you can instantly issue 50 physical or virtual cards. Digital cards can be used directly for online shopping or with your mobile wallet.

• ✅Simplified expense management:Do you want to organize expenses and keep track of your budget? With Relay you can quickly issue debit cards for new spend categories, project spend or individual teams.

• ✅Online card check:No phone call necessary. With Relay you can track transactions in real time, set spending limits and block cards, right from your phone or computer.

• ✅Accounting software integration:Relay lets you sync detailed banking information directly to QuickBooks Online or Xero, making bookkeeping a breeze.

• ✅Availability of ATMs:Relay's physical Visa debit card allows you to withdraw and deposit cash at AllPoint ATMs without ATM fees.

Ready to get started with Relay? You can request an account online within 10 minutes.Register here for the relay. 😎