Using Business Credit Cards Responsibly
There are several benefits of business credit cards for small business owners, but there are also a few potential business credit card problems. In order to maintain a high business credit score when using business credit cards, entrepreneurs have to use the credit cards responsibly. Here are four steps to smart business credit card use:
1. Choose business credit cards wisely. Pay attention to all of the small details when comparing business credit cards, from interest rates and other fees to grace periods and perks, in order to choose the best credit card for the particular business. A good option is often to check with the bank holding the business checking account, as there’s already direct access to customer service people, and the business may already have a reputation with the bank.
2. Avoid using business credit cards as startup capital. Many businesses can take a few years to turn out a decent profit. Because of this, it’s rarely smart to finance the full startup costs of a new business with credit cards. The business owner often simply doesn’t earn enough to pay of the debt, and incurs large interest costs or penalties, and sometimes is even put out of business because of the inability to pay off the startup costs to the business credit card company.
3. Don’t use business credit cards for all purchases. Business credit cards should be reserved for large one-time expenses, or things such as business networking and entertainment (when meeting with clients for example). Using business credit cards for routine smaller expenses (such as office supplies) can add up to big debt if not paid off right away. Always pay off business credit card balances as soon as possible to avoid being hit with heavy interest or late charges.
4. Manage employee spending. Business credit cards for employees will allow a business owner to monitor employee spending on business expenses, while keeping adequate financial records. This can allow them to save money by keeping a closer eye on actual costs of employee expenses, without simply relying on an employee to keep their own records and make smart choices.
What if I got myself a business credit card and I messed up my credit rating, do I get still get good benefits when applying for new business credit cards. Probably a common question but nobody seems to be asking.
That depends on a few things. If you mess up your personal credit rating, it can affect your rates and credit offers for your business, but it would depend on what kind of legal business form you run. It would be different if you’re running a corporation as opposed to simply a sole proprietorship. Rules can also depend on the state that you live in.
If you’re asking whether you’d still get good rates if you mess up your credit rating using specifically a business credit card, it’s very possible that you won’t. Your business has a credit history just as you do personally. If you damage your business credit history, you can get higher interest rates, or be turned down for business credit cards, loans, credit with vendors, etc. in the future.