Business Spends on Personal Credit Cards – Everything you need to know

What are business spends?

Ideally speaking, any spend that’s not done for your own personal need or consumption is a “business spend”.

But it is also broader than that, as type of spend may be same for both personal and business.

So, for the context of this article, business spends usually means high value business spends done for running the business of your own or where you’re employed in.

Business spends could be of many types and I’ve categorised them as good/bad, more on that later.

Using personal cards for business spends

Business credit cards are tough to get and even if you get them the rewards are too low compared to the personal credit cards.

So the obvious question is “Can I do business spends on my personal credit card?”

Yes & no!

Generally speaking, about 90% of those I know do business spends in one way or other.

This doesn’t mean all those are running business of their own. There are also ways for employees to do business spends. 

Before looking into the examples, let’s categorize them into good & bad business spend on personal credit cards that translates to less/more risk respectively.

Good spends:

Spends like Hotel/Flights/food spends which are more of a personal nature are good in bank’s eyes.

For ex, let’s consider a consultant who fly every other week to a new country to meet his clients. He uses his personal card for all travel expenses and get them re-imbursed by the company. 

These are good type of business spends because no one actually cares about these kind of spends as anyway one can’t spend too much money doing this. He may spend 10L or maybe 25L a year and usually not more than that. So it doesn’t hurt banks.

Bad Spends:

There are other spends like EB/Fuel/marketing spends. These are relatively bad on personal credit cards because these spends can be huge and also it can be tracked very easily. 

For ex, its a common sense that no one would pay 5 Lakh a month on EB, Fuel, etc for personal use. So these are bad spends on personal cards.

There are many more examples like these but above are the ones I frequently hear.

High value business spends

While banks are okay with business spends on credit cards, be it good or bad (as above), they’re bit cautious only when it comes to high value spends, especially in “bad spend” category.

For ex, someone paying INR 20,000 EB bill a month on personal card “maybe” considered “okay” but not the one who’s paying INR 2L a month.

Banks Actions – Latest Stories

Here are some the actions banks are taking when someone does high value business spend.

ICICI Bank: Recently over 25+ readers (since early 2020) reported about the issue of business spends on ICICI Amazon pay credit card. The problem is ICICI is blocking Amazon Pay cards in large numbers even if the monthly spends are in ~1 Lakhs range or even lower in some cases. 

It sort of makes sense, as the customers they target for this card hardly spend that much in a year. But wish they mention this in their terms prior.

HDFC Bank: While HDFC doesn’t block the card usually, they just debit the reward points issued on such transactions. This has been happening for a long time but they usually touch only very high spenders, like who spend ~1Cr or so annually. 

But now, as per 20+ reports received since past 3 months, it seems they’ve decided to lower that spend (or maybe these spenders got increased lately).

I’m still not 100% sure on how much spend they see to be “high”. Hope affected cardholders may throw some light on that.

Standard Chartered – There are couple of cases where SCB ultimate card  gets blocked along with reward points and the bank says they can’t afford to have cardholders with such high spends.

Citi Bank: Citi handles it slightly better by warning users not to do business spends when they see a flag on certain transactions and hardly makes rough moves like others. 

The fun fact is almost all of the Citi premium cardholders do a lot of business spends but then it usually falls under good business spend and the cardholders usually mix it well with personal spends too. So its less of an issue.

So if you ask whether “is it fair for banks to do this?”

Well, banks save/earn in crores just by not giving points to such accounts, all in just a single click that would do the magic for them. And anyway they’ve put it in MITC that its intended only for personal use. So why not?!

But yeah, they could be more friendly (as far as I know) like how Citi does. Warning prior to making any major move on the account is a friendly way to handle this issue.

Why banks do that?

There are very many reasons. Here are some:

  1. Free working capital: If you use Credit cards every month for high value spends, its more like a free business capital which will otherwise cost you at least 15% as interest if you go for a business loan. Moreover it costs banks to lend you this money on credit card.
  2. Rewards: Banks usually earn 1.5% or so from the merchant on our spends but give us 3% or so rewards on select cards. That makes sense for them for reasons which we may discuss some other day but rewarding very high business spends at this reward rate breaks their balance sheet.
  3. Legality: This is bit rare and usually falls under manufactured spends like NPS contribution on credit card issue which we saw recently. Its sort of seen as a money laundering issue as a whole and the banks are supposed to prevent such unwanted rotation of funds.

I would say these actions are far better than changing the product altogether. For example, these type of spends are the reason for indusInd to add new restrictions that affects not only those who game the system but also everyone.

So seeing in that angle its far better to deal select cardholders privately rather than imposing limits for everyone. Wont you agree?

Best Practices

So if you have business spends and still want to make use of personal cards, here are some of the best practices that you could follow:

  1. Have a good mix of spends in all categories
  2. Don’t do frequent high value txns
  3. Keep your annual spends in control, spread across multiple cards
  4. Get business credit cards if you need working capital
  5. Redeem those reward points soon, always.

Following above not only helps you stay away from unwanted flags but also helps the entire cards ecosystem as a whole. And banks could also take right decisions to run promos with the non-inflated stats.

Final thoughts

Overall, it maybe fine to do small business spends on personal credit cards then and there.

But if you have high value business spends, its better to go for Business credit cards that’s meant purely for business purposes.

This way your spends will get reported only to business PAN and not to your personal PAN which leads to further complications in accounting.

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