Small Business Credit Cards

Wednesday, June 13, 2012 at 9:11pm by Site Administrator

How Credit Cards Can Benefit Small Businesses



Small businesses often need a financial edge during slow economic times, at start up and in seasonal occupations. A business credit card can ease the financial burden during these times giving business owners access to affordable cash flow. A business credit card is an unsecured line of credit that requires no collateral. In a small business, cash flow can mean the difference between success and failure. If owners do not use business credit cards conservatively and responsibly, they can quickly spiral out control leaving an owner with a closed business and a pile of credit card debt.

Choosing a Business Credit Card

The majority of business credit cards start with a line of credit of no less than $50,000, making it enough to see your business through slow times. Many businesses use several business credit cards because the credit card terms can serve different purposes. A card with a 0% introductory rate is an inexpensive option. Most zero rates offered expire within a year so the balance needs to be paid in full before the expiration date. Ideally credit card balances need to be paid in full every month, but if individual circumstances require a business owner to carry a credit card balance look for the free interest offers and lowest APR available.

Never apply for a business credit card without reading the conditions and terms. A business owner has to know what they are agreeing to in order to consider a credit card as a business tool. Interest rates vary according to a business’s credit history. Those with a good credit score will receive the best interest rates. Business credit cards now offer a huge variety of rewards to entice business owners to apply for their card. The additional benefits are certainly worth taking into consideration, but do not take a card based solely on rewards.

When to Apply for a Business Credit Card

Try to establish a good credit history for your business before applying for a credit card. A bank loan or a supplier that extends credit is a good starting point. Apply for a business credit card before you actually need one. Your business can start establishing a good credit history by paying all balances in full each month. Getting a business credit card before finances become tight means your business already has an accessible line of credit. If you wait until a cash flow problem exists to apply for a business credit card, there is a good possibility your application will not be approved. If a credit card company approves your application while you are in a financial bind, it is likely that you will have to pay a higher interest rate.

A Business Credit Card Makes Tracking Expenses Easier

It is generally not a good idea to use a personal credit card for business expenses. Separating business costs from personal ones is time-consuming and confusing. It is much easier to track business expenses using a business credit card. Use an accounting software program or a credit card service to keep track of expenditures. Accounting programs can automatically separate expenses into the proper categories. If you use your card for all business expenses, you can easily see all the business expenses for the month when you get your credit card statement.

Many businesses go a step further by issuing credit cards with pre-set limits to all employees that make purchases or incur travel expenses. It makes it simpler for a business owner to distinguish legitimate business expenses from frivolous spending. Going over a credit card statement is quicker and more effective than trying to wade through receipts. It gives small business owners the opportunity to take corrective employee action, which will decrease unnecessary purchases or services.

Utilize Rewards Included in a Business Credit Card

Do not apply for a business credit card based on the rewards they offer. Interest rates, line of credit and term agreements should dictate which card you choose. However, the rewards can benefit a small business and save some money. Different cards offer different types of rewards, so determine what rewards your credit card offers.

Airline miles, cash back, gift cards and an account credit are some of the most popular rewards offered. Another benefit of many business credit cards is discounts on services and merchandise. Many cards offer as much as 10% discount for qualified purchases or services. Some membership credit cards offer many discounts including insurance and cell phone service. Consider rewards as a reinvestment in your business.

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