A couple of days ago, I received an email from a reader. He had an interesting question that I thought I would share. Here it is:
“I have roughly $67,000 in credit card debt currently (down from over $100,000) and have been doing this through balance transfers to low interest rate cards successfully (without using the credit cards for purchases) for a while. What I’m wondering about is this…I have been receiving business credit card offers with very good offers of low (or zero) rates for fairly long periods of time (Advanta, for example). Is it advisable to transfer balances of family credit card debt to business credit cards? I could argue that the business is providing a loan to the family to cover credit card expenses and the family pays back the business at a rate just above the business credit card rate (so that the business rate is a tax-deductible expense) and we are only effectively taxed on the difference between the business credit card rate and the rate family loan rate (maybe a difference of 1/2 of a percent).”
The short answer, in my opinion, is “probably not a good idea.” After all, the main point of having a business credit card is so that business and personal expenses can be kept separate. That said, there is probably some legal finagling that one can do to make this legal. I would talk to a tax attorney or an accountant about this, just to make sure that what I was doing is acceptable to the IRS. However, tax deduction aside, if you plan on simply trying to take advantage of a low interest rate, this could work – as long as the business credit card company does not ask questions before completing the balance transfer. A 0% APR credit card is always nice. Just getting the lower rate could be a real money-saver in interest rates. I just don´t know that I would take the tax deduction. Are there any tax specialists or legal hounds out there? Or just regular business folks with an opinion? Have any of you tried this?