What Are The Consequences Of Transferring Money To A Personal Card?

personal card

What are the consequences of transferring money to a personal card?

A bank account has long ceased to be synonymous with wealth. Today it is just a convenient way to do business, which in most cases cannot be done without. A bank account is also tied to a plastic card that almost any person has. Can an individual entrepreneur use it instead of or in parallel with a current account? Is a combination of “personal” and “work” funds allowed?


Is it possible without a current account at all? 

An individual entrepreneur is an individual, and he can get himself a plastic card from a bank, on the balance of which the bank will charge interest. It may seem that it is more convenient than paying for the maintenance of a checking account. 

Consider the reasons why it is still more convenient for individual entrepreneurs to use a current account.

When cooperating with legal entities, difficulties may arise when making payments from both one side and the other. Or you can lose a potential partner – the company will not want to deal with a counterparty without a current account.

When conducting all calculations in the “cache”, you will have to spend time delivering cash and depositing it in the cashier, worrying about protecting funds during transportation, etc.

Cash transactions provide for compliance with the rules of cash discipline – this is additional complexity and control.

Important information: Before making any credit card transaction check the card validity and eligibility with a credit card checker. And don’t forget to check bincode also.

Any time you make an electronic fund transfer you need to provide the bank routing number along with a bank account, swift number. For example, if you’re holding a bank account in the bank of America then you’ll need to provide the bank of America routing number.


Personal account instead of current account – why?

An entrepreneur who asks the question of whether it is possible to carry out settlements not through a bank account, but through a personal card of an individual, wants to ensure himself some benefits:

  • No need to go through the procedure for opening a current account;
  • Some of the customers prefer to make payments from card to card;
  • Economically more profitable: servicing a bank card is much cheaper than a bank card.


What do individual entrepreneurs want and risk?

The interest of entrepreneurs in the opportunity to perform the following types of operations:

  • Payment to a personal bank card by clients;
  • Withdrawing money;
  • Transferring money from your bank account to the bank cards of third parties.


Crediting other people’s funds to a personal IP card

Is it possible to receive payments to my checking account from clients, especially on a regular basis? In other words, it will be the use of a personal card for business purposes. Based on the positions of the tax office and the bank, the answers will be different: the tax office does not directly object, the bank prohibits, but cannot always control.


Possible risks from tax

The inspectorate may deem taxable all receipts on the card, not just those that were made “for business”. As a result, the tax authorities have the right to charge additional tax, write out a fine for arrears and a penalty for late payment. The individual entrepreneur will have to prove which part of the proceeds is income. And which is not, and this must be in a document form. If they fail to prove this, they may be charged with “systematic tax evasion”, which is fraught with serious sanctions.


Possible risks from the bank

If an entrepreneur violates the conditions for using the bank’s service, and the transfer of entrepreneurial money through a personal card is a violation, the bank has the right to stop supplying the service, that is, to block the card, and not only this one, but also others belonging to this person.


Withdrawing your funds from your current account to your card

From the point of view of the law, both on the current and on the personal account, an individual entrepreneur keeps his own funds. Business income can be used by an entrepreneur as he pleases, without restrictions, including withdrawing a personal card for any needs. The purpose of the transfer should indicate “Business income, excluding VAT” or simply “Material assistance” (in order to avoid a possible conflict with the bank).


Potential risks

As stated above, banks do not favor the “mixing” of personal and business funds. It is not uncommon for them to send such clients a warning and recommendation. However, this is a recommendation, not a prohibition, to which they have no legal right. In response to such a demand, one can point out its illegality and erroneousness, because the property of an individual entrepreneur and an individual is one and the same. 

If large sums regularly pass through this operation, you will have to explain their origin and purpose to the tax office so as not to get charged with tax evasion.

Bottom line: this operation is allowed, but it should not be abused. If it is proved that you are using the transferred funds for business, you will have to pay tax on them. For personal purposes – translate to health.


Transferring funds from your bank account to someone else’s plastic cards

This method of calculation can take place in two situations:


  • payment for the services of partners or the salaries of their employees, bypassing the current account;
  • Personal transfers of funds.

In the first case, this is formally conducting business, that is, the same provisions and risks are applicable. As when crediting “business” money to a personal card, that is, it is not recommendable to do this.

The second case, logically, should not be seditious. Theoretically, can’t an entrepreneur pay with money earned in business for his wife’s purchases, treatment of a relative, etc.? However, the law says that the current account is intended specifically for entrepreneurial activity. Therefore, the situation is ambiguous.


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