With the growing popularity of small business credit cards and ever changing interest
rates, now is the time to learn the steps to effective small business credit card
management.
We've entered into a new age of credit for small business. New opportunities
apply but credit debt still needs to be approached with caution. Over 2/3 of small
businesses use a credit card for expenses with only 40% using a business credit
card exclusively, as indicated by a Tower Group report. Should you use a small business
credit card over a personal card?
Yes. With prudent use and management, your small
business credit card can provide many benefits including:
Advantages of Small Business
Credit Cards
Avoid Co-mingling:
Mixing your business and personal transactions
creates potential tax and money management problems. By using a small business credit
card, you will let the IRS and anyone else know you are serious about your business.
Easy Itemization:
Tracking your business expenditures at year-end can be a nightmare
for small business owners. Many credit card companies will provide you with a year-end
statement summary with your transactions itemized and categorized. Why worry about
a shoebox full of receipts? Organize your bookkeeping process with a small business
credit card.
Build Business Credit:
A small business credit card provides a newly
established business the opportunity to build business credit. This will be useful
in the future as your business grows and you need capital in the form of credit
lines or loans.
Special Rewards:
The competitive credit card and business market
has led to the development of reward and discount programs for small business credit
card users. Discounts and rewards range from office supplies and travel to software
and phone services.
Take advantage of using the credit card to lower your expenses.
Manage Employee Spending:
Another plus to small business credit cards is the ability
to provide cards for your employees with preset limits. Just make sure you monitor
their spending on the separate statements you receive. A small business credit card
is like most financial instruments - responsible use of credit can help your business
- misuse of your business credit makes you personally liable in most cases and has
the potential to destroy your business and dreams. Use these small business credit
card tips to effectively manage your credit.
Steps to Effective Small Business Credit Card Management
Apply at Home:
Always consider applying for your small business
credit card at your existing financial institution. Your banking relationship can
aid with the approval process.
When you need a line of credit or loan you will have
a relationship established with your lender helping with credit applications over
$100,000 not using automated scoring systems.
Limit Card Hopping:
Signing up for
multiple cards to take advantage of deals can have a negative impact on your credit
rating and make managing your cards more difficult.
Use Grace:
The majority of
small business credit cards offer a 21-day grace period before you have to make
payment on your purchases. Improve your cash flow using a credit card instead of
checks since the new Check 21 act creates quicker clearing of checks.
Pay Online:
Save time and extra costs by paying your small business credit card online versus
paying by teller at your local branch or mailing in your payment.
No Cash Advance:
Reduce credit card fees and interest costs by not using the cash advance feature
on your card. Cash advances incur more fees and costs. Use your business account
debit when you need immediate funds.
Avoid Late Payments:
Late fees and high interest
rates quickly erode the merits of using your small business credit card. Be responsible
by paying off your business credit each month.
Treat your business credit card ownership
as a privilege and you will avoid the disastrous effect of credit card mismanagement.
Apply the same level of responsibility as the rest of your business and you will
enjoy many more years of profitable business growth.