10-14-2012 11:43 PM
Banks don't like business charge on personal credit card? I'm talking about inventories. Say I buy some office supplies/gas or products for reselling for my business. Banks don't like these things being listed on a personal credit card? Is it for risk control?
Someone mentioned this on my previous post and I can not find enough information about this through Google. Thank you in advance.
10-14-2012 11:46 PM
I thought it was addressed in your other thread, fairly well
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10-15-2012 12:00 AM
This is specifically why banks have "business credit cards" and "personal credit cards". If a CCC happened across your account and saw business related activity or odd activity for a "personal account', you might set off fraud bells with the CCC. If you have a business, you need to obtain a business credit card solely for that purpose.
10-15-2012 04:22 AM
A lot less questions at tax and audit times.
10-15-2012 04:42 AM
10-15-2012 05:49 AM
+1 The CC company that issued your personal card is doing just that, giving you a personal card. If you were to start making large purchases for inventory, business expenses, etc., that is going to set off a red flag for them to question your purchases and your risk to them.
10-15-2012 05:49 AM
There is nothing illegal about using personal accounts for business purposes, at least for a Sole Proprietorship. It may be against the credit card agreement, but it is not like you will go to jail. A lot of people use personal cards for business use because business cards have little to no protection. If you buy some computers with a business card that are dead on arrival and the distributor will not take them back, I do not believe it is as easy to file a chargeback with a business card. Interest rates on business cards are low, but I do not believe they are regulated the same as with personal cards now.
The only good thing with a business card is that you can be carrying a $20000 balance and none of the personal creditors will notice, unless it is with them. Business cards have higher transaction fees, which is probably why lenders push them so much. Really if they cared so much about business vs personal, they should require some type of valid business identification to make sure only business owners are applying for business cards.
10-15-2012 06:18 AM
In accounting, you there is something called the Economic Entity Assumption, where it states that activities from different entities have to be kept seperately on the books, thus personal transactions can not be made on a business account and vice versa.
10-15-2012 09:14 AM
And for a sole proprietor, there is no seperate entity. The person is the business, the business is the person. Your accountant would prefer them seperate for clarity, but as a sole proprietor it is far less rigidly required than a corporation, LLC, or partnership.
Credit card companies don't want it because the risk profiles are different, and the laws are different (in regards to what protections you do or do not have). Also it's a profit thing -- they price personal rewards cards based on a particular spending pattern, business use of the card will likely be quite different and may not be profitable with the particular rewards offered.
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