Business or Personal Credit Card?

5 Replies

So I have created a DBA and signing up for a Chase Business Checking Account to organize money flow and make filing taxes easier. My question now, if there was an expense/repair that I need to pay, should I use my personal credit card and pay it in full within a month or open a business credit card?

My personal credit card has a limit of $30k with only 4% APR and 2% unlimited cash back on all purchases. I was told it is very bad mixing business and personal together, but I don't have a LLC so I don't even think it matters with my situation (I do have umbrella insurance). Reason for paying with credit cards is cause I like to use the perks that comes with them even though I can pay in cash (I haven't touch my debt card in 2 years lol).

What do ya'll think/recommend? Can should I just use my personal credit card or open a business card with the DBA?

I do both.  In my research, and with no business entity, separating personal and business accounts is not required. However, it is good to get into the habit of doing so, especially if you plan to scale.  Additionally, as you stated, it is nice for tax and accounting purposes.  Personally, I sign up for whichever card is offering the best signup bonuses for minimum spend before making large purchases.  Then I try to use specific cards for personal and business.  There are cards the offer similar perks on both sides of the aisle. 

If you have an LLC or another entity with limited liability - you may be required to use/open a business credit card to keep the limited liability. it doesn't appear that we have one so we are good on that end.

Also - if you have a high DTI ratio associated with your personal name - you may want to open a business credit card if that will not show up on your calculations.

You may also just want to open up a business credit card to build up the business's credit history.

Business interest is deductible. Personal interest is not deductible. If you don't have separate credit cards, determining which interest is business and which interest is personal each month is problematic. If you pay the balance in full each month and never pay interest, then it matters less to have separate cards for business and personal. Just have mercy on your tax preparer and divide all your statements into spreadsheets showing the business vs personal expenses!

Best of Luck with Your Real Estate Investing!

Originally posted by @Paul Allen :

Business interest is deductible. Personal interest is not deductible. If you don't have separate credit cards, determining which interest is business and which interest is personal each month is problematic. If you pay the balance in full each month and never pay interest, then it matters less to have separate cards for business and personal. Just have mercy on your tax preparer and divide all your statements into spreadsheets showing the business vs personal expenses!

Best of Luck with Your Real Estate Investing!

 So I just need separate credit cards? I have a personal credit card that I don't touch anymore. I can just use that for personal and use the one that has the lowest interest rate and high limit for business. Or to take advantage of the business interest deduction, I would need a business credit card?

@Account Closed the card does not need your business name on it to make the interest deductible. If you want to start using your current card purely for business, you can do that. I would zero out the balance first (pay off all your personal expenses) before charging business expenses to it. Note somewhere in your records "as of [date] I will be using my XYZ credit card exclusively for business". The concept is to be able to clearly demonstrate to the IRS - in the event of an audit - that you know an expense (and its interest) is business-related because that credit card is used exclusively for business. It's not required, but it makes good sense.

I buy coffee for my waiting room at my office -  a tax-deductible business expense. I also buy coffee for my house - not deductible. When the IRS audits me, I show them I bought coffee for the office using the same card used to purchase my software, paper, ink, biz insurance, etc. ONLY biz expenses go on that card, and then it gets paid off ONLY from a biz bank account. I want it to be as easy as possible for the IRS to conclude the business expenses I claim are legitimate.

It also makes it easier for me to know/understand/analyze the health of my business. That's the true value of accounting! (Even if we tend to get wrapped up in the 'satisfying-the-Tax-Man' mindset.)