5 Times You Should Never Use Your Company Credit Card
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Business purchases should be made on the business card and personal shopping should be done on your personal card — simple as that, right? Well, sure, but our professional and personal lives have become so entwined that there's an enormous amount of gray area when it comes to deciding what charges to make and avoid making on the company dime. (See also: Best Credit Cards for Small Businesses)
It's not always an easy decision to make, but it's an important one, as questionable charges to the company could put your livelihood in jeopardy. Fortunately, we've got your back. Read on for our guide of the top business card purchase no-no's that could put you in hot water.
1. Trips to the Strip Club, Pool Hall, or Pawn Shop
If you're swiping the company plastic at places frequented by people with poor credit, there's a chance that the card issuer will cut your credit limit, raise your interest rate, hike your fees, or cancel your card. That's because they'll think that you, too, are more at risk for falling short on your debts. That's exactly what happened to Kevin Johnson, founder of Johnson Media, when his credit card company informed him by letter that the credit limit on his card had just been cut from $10,800 to $3,300. "In effect, the letter said I was shopping at places where people with bad credit shop, which means that I too am a greater risk," Johnson told All Business.
In fact, credit card issuers rate the spending behavior of 35 million cardholders each month, according to a 2010 survey by the Federal Reserve. It's a practice that's legal, though not necessarily ethical. CompuCredit, the company that marketed Visa and Mastercard to consumers in the subprime credit market, agreed to pay consumers $114 million in a settlement after the Federal Trade Commission filed suit against the credit card issuer in 2008 for deceptive marketing practices. Among the accusations was failure to properly disclose to cardholders that they could be punished for purchases made at bars, billiard halls, and tire retreading shops.
2. Splurges Your Small Business Can't Swallow
If you've got a small business card in your name, swipe with caution. Many of these cards have joint and several liability, which means that the business and the individual making the charges are liable for all debts, according to a spokeswoman for American Express. So if your business can't cover the trip to London you booked on the company dime, it could very well come back to bite you. "Any mistakes, missed payments, purchases exceeding your credit limit or simple mismanagement can be damning to not only your business rating but your personal credit score," writes Lou Dubois of Inc.com.
3. Meetings That Are More Pleasure Than Work
If talk of Sunday night football is more entree than icebreaker, you should pay for meals with clients, co-workers, and the like out of your own pocket — even when business is briefly discussed. Why? Well, for starters, the Internal Revenue Service is particularly watchful for people who attempt to bundle business and personal expenses. And you don't want the IRS coming after your company for a purchase you made. Case in point: The agency once rejected a deduction of tickets to a baseball game because the volume levels at a ballpark don't allow for a comprehensive business discussion.
4. Personal Shopping — Even When It's Low-Cost
The risk of being caught by your boss isn't the only reason you should never charge personal expenses to your business card. "When an employee has been trusted to be an authorized cardholder of a business or corporate credit card, the employee is agreeing only to use the card for business use," writes Jason Steele of The Credit Card Solution Program. "Using such a card for personal use, with the expectation that the employer will pay for non-business transactions, is tantamount to fraud."
5. To Get an Upgrade
Upgrades on rental cars, hotel rooms, and plane tickets are on most companies' list of prohibited charges. It's not that your boss wants to deny you extra legroom on your flight to Dallas. Rather, she just doesn't want to foot the bill for it. "It's for personal, not for business," Capital One spokesperson Sukhi Sahni says of upgrades of all sorts. So if you're on a business trip and want a hotel room with a kitchenette, charge the basic room to the company and pay for the upgrade out of pocket.
What have you used a business credit card for that turned out to be a mistake? Please share in comments!
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