How Can I Move My Personal Credit Card Debt to My LLC?

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Q. How can I move my personal credit card debt to my LLC? I started a company but I funded it with my personal credit cards first. Now I would like to move those expenses to my company’s LLC.

Dear reader,

As a business owner, it’s wise to keep your personal and business finances separate. It’s easier said than done, especially when you are starting out. It’s not uncommon for some business owners to want to transfer their business expenses from their personal credit cards to their business lines of credit, which is possible for you as the owner of your own LLC. To find out how to transfer the balance contact the business credit card issuer and ask for their instructions. Creditors may have different ways to do it, but it is usually through an electronic transaction or a paper check. The secure process is straight forward, and you will be asked to provide some personal information along with your credit card details. However, before your transfer your business debts, consider the pros and cons of such a move.
If you have a business credit card for your LLC and you are the sole company owner, you will still be personally liable for the debt. In fact, many business cards relay on your personal credit to issue business credit, even if they don’t report your new business credit card to the consumer reporting credit bureaus (Equifax, Experian, and TransUnion). Many business cards only report to your personal credit reports if you are behind on your payments or are severely delinquent on your accounts. If your business card does not report to the consumer credit bureau, transferring your debt could have a positive impact on your credit score since you will be reducing your utilization ration. This means your debt to income ratio will decrease because you owe less, and you will free up some of the credit you were using. Once you move the debt to the business card, you should already have a repayment strategy in place.
Besides what you already owe, you should expect to pay a transfer fee, typically 3%–5% of the balance transferred, and you will have to factor in your new interest rate. Business cards generally have high interest rates, regardless of how great your credit score is, and they could increase it without much prior notice, even if you don’t miss any payments. However, if you plan to pay your full statement balance before or on your due date, a high interest is inconsequential to you. Yet, you should know in case you carry a balance and need to budget for it.
Business cards also come with fewer consumer protections than personal ones which are governed by the CARD Act. Some of these protections have been voluntarily extended to business borrowers by creditors, but they can vary. For that reason, as well as others, make sure you always read the fine print of any financial document before you sign. If you are moving forward with the transfer, make sure you clearly detailed these expenses on your accounting books to keep an accurate record of your cash flow and expenses. And if you don’t have a repayment strategy to help you manage the transferred debt, don’t hesitate in contacting an NFCC-certified credit counselor. They can help you review, organize, and manage your overall personal finances so that you can focus more on growing your business. Good luck!

Bruce McClary, Vice President of Communications
Bruce McClary is the Vice President of Communications for the National Foundation for Credit Counseling® (NFCC®). Based in Washington, D.C., he provides marketing and media relations support for the NFCC and its member agencies serving all 50 states and Puerto Rico. Bruce is considered a subject matter expert and interfaces with the national media, serving as a primary representative for the organization. He has been a featured financial expert for the nation’s top news outlets, including USA Today, MSNBC, NBC News, The New York Times, the Wall Street Journal, CNN, MarketWatch, Fox Business, and hundreds of local media outlets from coast to coast.