The Real Cost of Mixing Personal and Business Funds

Written By: Christy Moglia

August 9, 2021

You may be thinking about turning your idea into a business venture. Or you may have established a company but are wondering if it’s time to open a business checking account. We’re here to tell you: SEND IT! Opening a business checking account, and applying for a business credit card, is a must for serious business owners. Here are 5 top reasons why you should separate your personal and business bank accounts:

1. Tax Time Cleanup

When it comes time to file taxes, many business owners wait until the last minute. I know I do.  But when that happens, bookkeepers and CPAs must navigate through hundreds, if not thousands, of transactions which become even more muddled when personal transactions are intermingled. Were these Costco purchases for office supplies or family groceries? And I bet you won’t remember 10 months down the road. Due to the time crunch and limited staffing availability, the costs of cleanup services increase dramatically. At CDA Books, we charge a minimum of $1,000 for annual cleanup. That’s because most business owners’ bank statements are cluttered with personal expenses and one-off transactions with no support or even recollection of the event. Keeping a separate business checking account and credit card makes the cleanup work so much quicker and cheaper. Don’t make the mistake of mixing your transactions. Besides, I know you don’t want us to see how much you spend at TJ Maxx.

2. Profit Visibility

You may think you know the profitability of your product or service. But have you accounted for all of your overhead costs, various supplies, unexpected bills, or extra marketing expenses? Sometimes, business owners make estimates only based on initial calculations and they miss the typical but unforeseen costs of doing business. Before they know it, their company is bleeding and they are racing the clock to gain back control. If you want to know the current health and trends of your company, keeping personal and business funds separated makes this possible.

3. Hobby vs. Business Classification

Nobody wants a visit from the IRS. If your business transactions are intermingled with personal transactions, the IRS may determine that your deductions aren’t viable and classify your business as a hobby. Hobby expenses are not deductible from your income and the IRS may determine that you owe more taxes and may demand that you pay penalties and interest. Keep Uncle Sam away by dedicating your business transactions to their own accounts.

4. Higher Personal Credit Score

That’s right, most business credit cards won’t affect your personal credit score. If you expect to make big purchases for your startup or if you have a costly project coming down the road, getting a business credit card allows you to make those large purchases without affecting your personal credit score. You can also take advantage of the cash float by delaying payment for up to 45 days. Or leverage your debt even further with a payment plan. Don’t forget to set up autopay for your new business credit card from your business checking account. If you want to leverage that available credit, set your autopay to the “minimum amount due” to avoid bank fees.

5. Obtain Financing

You may reach the point when you want to take your business to the next level by obtaining financing from a bank. Before they dish out funds to your idea, they want to know where your company is going from a numbers perspective. If your expenses are commingled, the lenders will have a difficult time assessing your financial health which translates to a longer wait time until you receive your funds. What’s worse is they may not take your work seriously since you don’t have a dedicated business checking account. Make their job easier, and get your funds more quickly, by not mixing your business transactions.

Hopefully, we’ve convinced you to keep your personal and business funds separated. But how to get started? Here’s our favorite local banks that we recommend and partner with:

Mountain West Bank and BankCDA offer free business checking accounts. Looking to take your business to the next level? We work closely with these banks’ lending departments in order to secure financing for clients like you. These local banks also proved to be advantageous over big banks for SBA loans and grants. We were able to secure our clients with over $600,000 in PPP funds with a much quicker deposit than companies who applied at commercial banks (which unfortunately favored mega-corporations over the small to mid-sized businesses). Head to their websites to learn more.

Credit Card Recommendations


We have found that Chase bank offers the best signup rewards, so if you’re expecting to make some large startup or project purchases, Chase may offer the highest cash back bonuses for those initial purchases. Are you wanting to leverage your debt to the maximum? AMEX has a “Pay Over Time” option on selected transactions to smooth out your cash flow even more. Plus, AMEX typically offers instant credit card numbers, so you don’t have to wait for your physical card in the mail to start making purchases.

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