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

By | October 8, 2020
Business Spends on personal credit cards

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.

Have you ever faced issues with any bank when it comes to business spends on credit cards? Feel free to share your experiences in the comment below.

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

  1. Chetan

    Dear siddhartha
    Your article is absolutely knowledgeable recently I got notice from HDFC Infinia regarding warning for using Business purposes and they’re stopped REWARDS last billing cycle …

    Reply
    1. Infinia guy

      Lost 3L points on Infinia, should’ve redeemed at-least for instant vouchers during lockdown. any ideas on how to reverse them..

      Reply
    2. VIPUL AGGARWAL

      HOW MUCH YOU WERE SPENDING EVERY MONTH? HAVE THEY STOPPED REWARDS ON NON BUSIBESS TRANS AS WELL?

      Reply
  2. Pranab

    “There are other spends like EB/Fuel/marketing spends” – What is EB?

    Reply
    1. Siddharth Post author

      Electricity Bill .. We usually call it as EB in Tamilnadu.

      Reply
  3. Yash

    If you pay your business expense like travelling through credit card then can i show it as expense to Income Tax department as Business expense??

    Reply
  4. Aakash Coimbatore

    Thala..Loved this article.. Romba helpful ah irunchu..
    I know you have work…but one question have seen many time you mention in article/ in comments reply/ in tweet reply that “will write about it later/ will update a post on that” Like this. So will those come? When will it come? Also Are you waiting for a right time to post those?

    Reply
    1. Siddharth Post author

      I run out of time, almost every time I say that.

      But I’m sort of free for next 1 week, so should be able to write some of those. Do let me know what you want to read.

      Reply
      1. Santosh Kumar

        If i may to add to this. any revisions to the list of 2020 best cards in light of the many revisions that have come up in the Covid times.

        Reply
      2. Aakash Coimbatore

        Ipdi Sudden ah ketta ena thala solrathu..
        You have mentioned it many times in past..Can’t remember on which posts!
        Some where you mentioned you traveled in Srilankan airline Business class..May be on that and that trip.
        Also The cards you have & how you use them..
        Think you have missed 1-2 Hotels review athum

        Do a Twitter & FB post like this thala..You will be getting 100+ different answers from people who follow CARD EXPERT on credit card and stuffs! You choose few topic & answer or choose the most asked question on that!

        Reply
      3. Pushpendra Rathore

        Write about the available credit cards which would entitle us for free membership like Netflix, amazon prime & hotstar. List all such cards.

        Reply
  5. Satendra Sharma

    Agreed with your thoughts.
    I am doing average 1.3 lakh monthly business spends on my personal cards on reimbursement basis. Purpose is to get credit period and reward points.

    I use different cards and different categories.

    I have never faced any issues from bank or tax department.

    Reply
    1. Santosh Kumar

      Keep an eye out that your total spends in a FY don’t cross the income you submit for ITR. You might raise redflags with income tax dept. Also, in case you do cross, make sure there is a plausible reason for that. Ex: You already have fixed assets,savings from earlier, borrowed from parents etc

      Reply
      1. Satendra Sharma

        @Santosh Kumar

        Thanks bro for your suggestion.
        I can spend business expenses on reimbursement basis more than my declared income. I do maintain account books for these spends.

        Reply
  6. RATNESH KUMAR

    As always,Covering all aspects and key points of business and personal credit card spends …..👏🏼👏🏼👏🏼👏🏼👏🏼

    Reply
  7. Vipul Aggarwal

    Thank you sir, very good article and everything is well explained. I agree to all your points.

    Reply
    1. Vinod Kannan

      I use the Infinia credit card for Fuel spends amounting to 10 Lakhs per month and more than a Crore per Annum. Bank charges me the Surcharge and There is no reward points on Fuel spends. So i think Fuel Spends is not a problem as far as banks are concerned . Moreover the Income tax part depends on your Company’s turnover. Those Business spends are accounted for in the ITR. So for Business people, it wont raise an ITR Flag if your company Turnover is good.

      Reply
      1. AbhiKohli

        How much surcharge ? Why do you use CC for fuel spend and pay in tune of 10-15K a month on surcharge ? Do you save that much interest on your working capital ? DC/UPI/Cheque etc will be much cheaper, no ?

        Reply
  8. Avijeet

    I have few cards, I use for Credit Cards extensively for EB Home, Residential & Commercial Property which i own (I collect from tenent as per sub-meter reading) ..
    I have been following 2 rules.
    1. Once the Milestone Benefits are achieved i dont use that card.
    2. I cycle through different cards.

    Though i am yet to get an INFINIA card (That will be a game changer)

    The cards i use.
    1.HDFC Business Regalia (0.93% Rewards)
    2.Axis Flipkart (1.5% Rewards)
    3.ICICI AmazonPay (1% Rewards)
    4.SBI SimplyClick (1.25% Rewards)

    Reply
    1. Balaji

      Does axis flipkart gives 1.5% for Utility Bills? Is there any limit on the max amount of the bill?

      Reply
  9. Yuvaprasath D

    My dad is LIC agent,he is using my amazon pay card only for all insurance payment for customers..He is paying the amount through Amazon app so I am getting 3% to 5%.

    Per month he is paying 50k to 1lakh..so am getting 5k as cash back in amazon pay..

    For eb monthly 5k am paying & rest others shopping 5k only.

    Is there any IT issue will come for me.

    Reply
    1. Santosh

      If your annual income is around 12L I think there should not be anu issues.

      Reply
    2. jitendra saraogi

      I think one gets only 2% for lic premium thru amazon icici credit card so how do you get 3% or 5%.please advise.

      Reply
      1. Yuvaprasath D

        Only for lic premium for non prime users 3% & prime users 5% we vl get

        Reply
        1. deva

          its technical glitz giving 5% on lic payments on amazonpay icici card since past few months..But with in next 2-3 months ,they will hold ur rewards and probably block ur card (same thing happend to me in aug)..Icici is worst in this case

          Reply
  10. Mohammed Tabrez

    My annual income is below 10 lakhs, 7.5 lakhs after deductions, but in the ITR balance sheet the gross turnover is listed as 30 lakhs per anum, so can i use credit card for 20 lakh and the remaining for bank account turnover? ITR form 4.

    Reply
  11. Maravan

    I redeemed my RP for Vouchers as soon as you highlighted the same topic in Twitter. I earned my 5L Mile stone reward points in Regalia by achieving the target in 1 month.

    Thanks for the Heads up Thambi.

    Reply
  12. Vinayan k

    Thanks for for your guidance, as it is very useful to all.
    According my experience, I use 50 percent of my four cards comes nearly 2lakhs for business purposes.
    I put EMI for 3months period regularly, from which banks are getting interest minimum 14percentage.
    I use good mix of my entire personal expenses like eb, medical expense ,telephone, recharges etc from two cards which are in higher limits over 1lakh. Since last 2 years I am following this practice.
    All monthly dues are being paid five days before the due date. No bank employee had called me yet for payment related issue or any other purpose.
    It is noted that, possibility of limit enhancement is less, while using personal cards to business purpose. Perfect payment shows my cibil score as excellent,but now I see a drawback this type of usage…

    Reply
  13. Ashish Nikhare

    Wow Siddharth ! This is a great article. This should have been your PAID/PREMIUM article ! How about buying a car worth 8 lakhs for a near friend with Personal credit card ?

    Reply
  14. Pranab

    This brings to a very old and ‘properly’ unanswered question!
    “How does banks make money through Credit Cards?”
    Last 1 year, I’ve earned an overall @6.62% (as points) on my Infinia Mastercard (including 10x & other bonuses) without giving back a single penny to bank. Paid all my dues on-time, enjoyed mostly 45-50 days credit period (most transactions are within 1 week of statement generation).
    In straight, HDFC would be in minimum 5% loss. But that surely isn’t the case. So, from where did HDFC get compensated?

    Reply
    1. Santosh Kumar

      The answer here lies in the details. Bank charges 1.5 to 2% from all retailers POS machines. Only very few keep track of reward points. And many pay fee and finance charges as well. Also, while we think we ar getting 33% reward points it is actually less than that. Somewhere around 20% would be my guess.

      Reply
  15. PK

    Surprised to read about electricity bills on this. I own a building which has tenants and I pay the rent on the tenants behalf and collect it from the tenants (to make sure no problems in delay of payment/cutting of line etc)
    I have been paying with my HDFC credit card for the last 3 years and have faced no issues as yet. Amounts are in excess of Rs. 10 lakhs per month.

    Reply
  16. Jatin

    Can a personal credit card be considered as a valid proof by Income tax department for business expenses?

    Reply
  17. RD

    I have both Infinia and Diners. HDFC lapsed 8L points that I had accrued over 3 years majorly from traveling, fk, Amazon and general spends. I had used the card during lockdown (just 2 months) to do some online transactions for business as most businesses had turned online only. While I had done at an avg of 1 txn every two days, I never exceed the CL. Intention was not to earn any points on these txns.
    I’m an imperia customer with very high SB balance with the bank.
    Strange for a bank to lapse all points instead of lapsing points related to certain txns.
    Wrote to them two weeks ago and yet to get a reply.

    Reply
    1. Maravvan

      It’s really wierd you would Hoard 8L points for so long, the mantra with RP is use it when it crosses 5 digits even without this issue there is a good chance the 8L points would worth less if they devalue the card you could have used it to visit one Tourist place a month conviniently. Instead of accuring it like Recurring Deposit. Anyways Lesson for other users
      RP MANTRA- USE IT WHILE YOU CAN.

      Reply
      1. AbhiKohli

        Maybe lock down screwed the plan 😀 I have 1.5L (Saved in last 2 yrs) which I was about to use for travel tickets …. but exactly then the XingPing chines virus stuck 😀
        I pay EB for my father’s business (40-80K a month) worried now..

        Reply
      2. RD

        I used to use my points for flights and hotels for my annual family international holiday. I never redeemed for vouchers
        or cash as they had lower value. Couldn’t use the points for travel because of covid. Any way, lesson learnt.
        Btw, never ever used the cards to create artificial spends. Escalated to the top level at the bank. Let’s see.

        Reply
    2. ajay

      Thanks RD for sharing your experience. Please do revert with any updates. Yours appears to be a case of bulk lapse where a selected number of cards saw points lapsed without any differentiation sought by the bank on a case to case basis. They should revert all your points is what I feel.

      Reply
        1. ajay

          Not that I know of. I had another issue last year when a high value transaction didn’t go through but money was deducted. The merchant also said that it has refunded the amount and gave a proper proof which I submitted to HDFC. But it took almost 2 months for HDFC to refund to me. And that too after multiple follow-ups. But it did come back. So, in your case should come back. Ask your RM he should get it done.

          Reply
  18. VIPUL AGGARWAL

    Hello Sid, like you mention on your article that card companies charge merchants 1.5% approx and still give us points upto 3.3% and some other offers as well, what is the benefit for them to provide such kind of deals? They also provide interest free period. I request you to write something about it.

    Reply
    1. Ankur

      Just search, how do credit card companies make money on google and you should be able to see the how credit card business model works.

      Reply
  19. Nipun

    Hi,

    Can we have some understanding of Taxation of Rewards/points from Credit cards

    Reply
    1. Shivi

      Cashback of over INR 49,999 is taxable as per existing IT laws. It depends on how you show them in your ITR in the first place (as a cash back or as a discount post purchase) or don’t show them at all!

      RPs would be converted to their worth in INR and the redemption value would be calculated accordingly. However, I haven’t seen anybody get into IT trouble over RPs till you are facing an IT scrutiny.

      Reply
  20. Anubhav

    Please review HDFC Millenia Credit Card. It looks to be an interesting one.

    Reply
    1. Ankur

      This card has so many terms and conditions to use, it better to stay away from millennia credit card. Just check hdfc t&c for rewards for this card.

      Reply

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