Control your credit cards – don’t let them control you
by Daryll ZahorskyWith 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 exist but credit debt still needs to be approached with caution. More than two-thirds of small businesses use a credit card for expenses with only 40 percent using a business credit card exclusively, as indicated by a Tower Group report.
Should you use a small business credit card rather than 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 market has led to the development of reward and discount programs for small business credit card users. Discounts and rewards can 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 it can help
your business, while misuse makes you personally liable in most cases and has the potential to destroy your business and dreams. Use the small business credit card tips below to effectively manage your credit.
Six steps to effective credit card management
1. 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 for more than $100,000 and avoiding the use of automated scoring systems.
2. 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.
3. 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.
4. 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.
5. 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 debit account when you need immediate funds.
6. 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.
Darrell Zahorsky is owner and principal of Pied Piper Internet Solutions, a business specializing in providing content development, blogging and search engine marketing for companies wanting to create a Web following. In addition, he is a small business expert and freelance business writer.
Cape Business Newsletters
Keep up with the latest issues affecting your business and your life! To sign up for any of the Cape Business newsletters, click here.