The simple answer is YES; you’re right.
Like oil and water, personal and business finances don’t mix well. Opening separate credit card accounts for each may be one of the most straightforward ways to establish a clear division between personal and business expenses. Separating business and personal credit cards can help you better manage your money.
Consider the following advantages:
It can raise your business credit score.
A company credit card can assist you in increasing your borrowing power when taking out a small business loan, assuming you pay it off on time. A clean credit report might also help you get lower interest rates and show the legality of your small business.
It may help you preserve your personal credit.
Another benefit of establishing distinct accounts is that you will not have to finance business transactions on your personal card, reducing the risk of exceeding your credit limit. Unless you default on your business credit card transactions, they won’t appear on your personal credit report. When your personal credit score takes a hit because you reached your credit card limit, it’s worth noting that banks use the same formula to determine how great or unreliable a customer is.
It can assist you with tax preparation.
Most credit card companies provide simple tools for producing customized reports that track your company’s expenses by category. Many of these costs are tax-deductible. When it comes to your tax return, you’ll need two distinct and detailed reports from each of the businesses. These separate, itemized statements will make things simpler for your accountant when preparing your taxes.
In a nutshell, having to separate business and personal purchases at the cash register might be time-consuming. However, once you’ve established your credit card accounts, you’ll see that maintaining them independently will save time and provide peace of mind. This can result in a clean financial history and avoid headaches as your company grows.
At Ten Key Accounting Solutions, we specialize in helping small business owners organize and maintain their accounting systems with efficiency and professionalism. Contact us today for a free no-obligation analysis and quote.