A business credit card is one of the easiest ways to lay the foundations for a positive credit history. It’s easier to get accepted for a business credit card than a business loan, and unlike a loan, one you have paid off your credit line, you can borrow it again without having to reapply.
Many business owners don’t use their credit cards to their full advantage, and you may be one of them. It’s time to get savvy and figure out how you can make the most out of your business credit card so you don’t miss out on all the deals and incentives your credit company is offering.
There are many credit card companies out there and not all of them offer the same interest rates, payment times and incentives. An important thing to remember when choosing a credit card for your business is to do research first. Once you’re armed with a business credit card, here are some things to remember.
Create a business plan: Before you even use your credit card, you should draw up a budget so you can keep spending in check.
Set a rewards goal: If you’re using a card that has incentives, set a goal for air miles or travel points and save them rather than using them for small purchases.
Use credit with all your vendors: If you link your business credit card to their accounts it will help you earn the maximum rewards possible.
Watch out for expiry: Keep a note on your calendar and make sure you use your rewards before they expire.
Watch employee spending: Each time an employee uses a business credit card, have him or her give you an expense report.
Borrow wisely: Don’t spend unnecessarily just to earn rewards.
Be accountable: Link all business credit cards to your company’s accounting software for easy bookkeeping.
Pay on time: Always pay on time. Late fees can range from $15-$40 dollars and will soon begin to mount up if you’re not careful. If you continue to miss payments you may also end up having your interest rate hiked. Late payment may also end up damaging your credit score.
Make deductions: Any interest and late fees on your business credit card are deductible on your taxes as long as the card was used for business transactions.
Don’t forget, for many business credit cards, particularly if you are a small business, you will have to provide a personal guarantee. This means that if you spend more than your business can cover, you will be personally accountable for the debt. Always schedule payments so that they’re on time and avoid late fees. If you follow these tips and keep your spending under control, you should be able to make the most out of your business credit card and help your company grow, while building strong business credit for the future.
Alice Mann works as an accountant with a variety of small and medium sized businesses. She writes about managing business finances and shares her tax tips around the web.