Sunil Nigam
October 25, 2022
Business Expenses and Personal Credit Cards: Employee Benefits

Introduction

An employee’s personal credit card can be a great way to reduce admin and apply control. Personal cards offer easy access, no extra paperwork or fees, and the ability to earn rewards that employees actually want.

However, it’s important to understand all of the pros and cons before deciding if using your personal credit card for business makes sense for you.

Using your personal credit cards

Now, we know how this may sound, and you may be sceptical. Employees are constantly submitting business expenses to their employer when they use company credit cards

As an employee, your personal credit card have incredible benefits which you're excited to leverage, and this includes points, rewards, AVOIS, air miles and more. At ExpenseOnDemand we are encouraging employees to use their personal credit cards to make the most of their benefits and have personal gain.

When you claim expenses using your personal credit card, it is the same as submitting an expense made in cash. The difference is that you personally benefit and amplify your rewards when using your credit cards.

Imagine, across the year, all the coffees, meetings, dinners, accommodations, flights and more can add up to huge rewards on your credit card. It could even mean a free business-class flight when you travel with your better half.

Employee concerns over making upfront costs before being reimbursed for your business expenses are also addressed because they can request a Cash Advance. Additionally, our solution allows a request for a pre-approval for large ticket purchases, which will then give you the peace of mind that your expense won’t be rejected. Eg. Purchasing a $2000 laptop.

This means your finance manager can approve and deposit your pre-approved Cash Advance into your bank account for you to use - before you even start spending. In turn, you submit these expenses to your business using our simple-to-use app. Learn more about the ExpenseOnDemand app.

Your personal credit card can earn the rewards you actually want

One of the more obvious benefits of using a personal credit card for business is the ability to earn rewards. If you are like most people, you probably want a bunch of airline miles or hotel points in your life. What if you could get cashback?

With a personal credit card, you can! You can earn rewards from some of the biggest brands in travel: Marriott Rewards, Starwood Preferred Guest Credit Card from American Express, Hilton Honors Visa Signature Card and United MileagePlus Club Card.

You could also choose one of these top travel cards and earn rewards on every purchase: Chase Sapphire Preferred Card and Capital One VentureOne Rewards Credit Card.

For business owners: You won't build a business credit report or score

Your business credit card will be reported to the three major credit bureaus, but you may not get that benefit if you pay for all of your expenses with a personal credit card.

That's because some companies require more information than just your name and address to verify your identity before issuing a new account—like whether or not you own any other businesses, have ever filed for bankruptcy, or even what type of job you do (for example, freelance writers often don't own their names).

If this is the case for your company, then using a personal credit card will help build a solid record of upkeep and ensure there aren't any unknowns that would prevent them from offering more services down the line.

Protection might be better than business cards in some cases

Personal cards offer protections that are better than typical business cards in many cases. For example, many personal credit cards offer purchase protection — meaning that if an item you buy with your card is damaged, lost or stolen within the first 90 days of ownership and you can't return it to the seller, your card issuer will replace the item for free.

That's more than most business credit cards provide.

Personal credit cards also often include extended warranty protection when you make a purchase using your card and then register your product within 120 days of buying it. This means if something breaks down on your new gadget after the manufacturer's expired warranty.

Still, before its one-year anniversary, you can file a claim with American Express or Visa to have them repair or replace it at no cost to you!

In addition, several personal credit cards also come with price protection (meaning they'll reimburse any difference between what someone charged on their account and what they paid if there's a drop in price within 60 days).

Reference: Money Supermarket

There could be tax-related benefits

f you use a personal credit card for your business expenses, there could be tax-related benefits. Business expenses are tax-deductible, and personal expenses are not.

However, if you make purchases on a business credit card that aren't related to your business and then reimburse yourself with cash or another form of payment (e.g., check or direct deposit), the tax authorities may consider those funds taxable income in the year they were received.

When deciding how much money to put on your credit card for that business trip to Europe over the summer break, be careful about what types of things you buy with it: food from restaurants and hotel rooms are generally considered ordinary and necessary business expenses; alcoholic drinks at bars usually don't count as such because they aren't necessary for success in most cases—but certain types of entertainment may qualify as "necessary" if they're related to networking opportunities that can generate revenue down the road.

If you're worried about whether something might be considered an "ordinary" expense rather than a luxury one—like taking your spouse along with you on vacation when they aren't technically part of your team--it's best not to risk getting into hot water by asking someone who knows better (like an HR or your finance manager).

Using ExpenseOnDemand's 'Cash Advance' function

The Cash Advance payment function allows you to set a monthly spending limit for your employees and track the amount in real-time.

Simply create an expense policy, spend limits and select the advance payment option. Once these steps are completed, all future expenses will be monitored in real time by ExpenseOnDemand. You can even set daily or weekly spending limits as well as categorise expenses according to their nature, such as office supplies, travel & accommodation and more (provided you have created these categories).

The Cash Advance payment function is particularly useful if you want to increase transparency within your business while saving time on administration fees associated with manual approvals of each transaction which would otherwise take hours each month.

It also frees up staff on your team by simplifying the approval process so they can focus on other important tasks instead of sitting at their desk approving transactions one by one!

See how the 'Cash Advance' function works with ExpenseOnDemand

Conclusion

In the end, you should carefully consider using your personal credit cards for business expenses. It's better to get clearance from your company before using it with the expectation that your expenses will be reimbursed. In fact, ExpenseOnDemand encourages its customers to offer this “free perk” to its employees!

Business owners can set spend limits using ExpenseOnDemand as their expense management software solution. This means by applying expense policies to specific employees, daily, weekly or monthly spending limits can help control how money is being used within the business.

What’s more, with the ‘Cash Advance' function that is available, your expenses can be pre-approved, and money can be provided to employees in advance to make expenses.

For example: Taking a business trip as an employee, you'll need flights, accommodation, travel, food and drinks. Your business can set a £500 limit; this is all the employee can spend on those things.

It can be an effective tool if you decide to use your personal credit card for business expenses. Just make sure that you have enough funds available in your account and that you're staying within your limit at all times, so there are no surprises when it comes time to pay off these bills!