Why banks flag business expenses paid on personal credit cards

livemint.com:

Credit cards come in two broad categories – personal and business. The fine print of personal credit cards clearly says that they cannot be used for business spending, and hence separate cards are issued for business expenses. However, the majority of self-employed or business owners bill some of their business expenses to their personal cards. This begs the question: How do banks allow this?

Banks monitor spending activities, regularly auditing suspicious transactions and on finding any misuse, they repeal the accumulated rewards, or worse, suspend the card.

As per the most important terms and conditions (MITC) of banks, non-commercial credit cards can be used for personal expenses only. Non-personal usage includes buying goods or making payments to run a business, making commercial payments to merchants, and any other expense that is not for personal consumption, which includes buying things for others to maximise spending.

However, certain expenses are difficult to classify as personal or non-personal. For instance, flight or hotel bookings made by an employee for a business trip that the company reimburses later. Or say a freelancer works out of a home office and pays the house’s power bill with a credit card.

For some merchants that accept both retail and business payments such as utilities, flights, hotels, and vendor payment platforms like BharatNXT, there are no separate Merchant Category Codes (MCCs) for retail and business. So, there is no straight method for banks to know whether a business or personal expense is being billed.

Queries sent by Mint to HDFC Bank, ICICI Bank, Axis Bank and Kotak Mahindra Bank about how they differentiate between retail and business spends did not receive any response.

With such