Do I really need separate credit cards for my business and personal expenses?
The short answer is YES, you really do.
Like orange juice and toothpaste, personal and business finances don’t mix well. One of the easiest ways to draw a clear line between your personal and business expenses is to open separate credit card accounts for each. Separate business and personal credit cards will not only reduce the potential for problems, but also make it make it simpler to manage your finances. Consider these benefits:
It can improve your business credit profile
Presuming you pay it off on time, a business credit card can help boost your borrowing power when you need a small business loan. A good credit record could also make you eligible for lower interest rates, while also demonstrating the legitimacy of your small business.
It can protect your personal credit
Most business credit card transactions won’t appear on your personal credit report unless you default. Also, separate accounts mean you will not need to finance business transactions on -- and risk maxing out -- your personal card. Reaching your personal credit card limit not only restricts your spending, it can hurt your personal credit score.
It can help at tax time
Many credit card providers make it easy to create customized reports that track your business expenses by category. Many of these expenses are tax deductible. These separate, itemized statements will make things easier for your accountant when completing your tax returns.
In short, it can be a pain to ask a cashier to separate business and personal transactions at the cash register. But looking down the road, you’ll see that maintaining separate credit card accounts will save you time and give you peace-of-mind. Not only will this result in a clean financial record, but it can save you from headaches as your company grows.
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