Business credit cards should be used prudently in all cases. Sometimes, they may be a saving grace in a time of need when cash isn't readily available. Still, take precaution when you have to use your business card. Keep accurate accounts of outgoing expenditure so you always know where you stand.
Credit Card Dos and Don'ts
Banking entities advertise their credit cards as having the benefits available. While they do offer benefits, whether they will be of any use to your business is contingent upon how you actually use your line of credit. All rewards programs are not necessarily the same. You should take your time to research the card you are applying for prior to making any decision on which card to choose.
1. Apply for a business line of credit from your current bank.
Applying for a business credit from your bank that you have a good financial history with is a smart idea. Because you are an established account holder at the bank, the approval process may be expedited.
This is the best option if you don't have any established business credit. Your bank can use your history with them in lieu of business credit. Using the bank you have a report with can be advantageous for you. They understand better than a new bank what your financial habits and tendencies are. They can look back over the length of time you had your account and make a better, and often time, more generous decision about your business credit line.
2. Limit the number of cards you apply for.
Don't apply for more than what you reasonably need. Gauge how many you need by how much credit you get. Having a larger credit line than necessary can increase your chances of mismanaging funds.
The more credit you think you have to spend, the more likely you are to spend it without thinking twice about it. Huge credit lines are very tempting for new business owners. Restrict yourself so you can maintain a good credit line with you card holder.
3. Use your line of credit for business expenses only.
2 out of 3 businesses use credit cards to cover costs. However, less than half of them use their business credit only for business. Keep your personal and business overhead separate. This is very important even if your business is at home. Keep your business account information accurate. This helps when filing taxes time comes.
4. Keep an annual summary for accounting.
Your annual business summary that your bank gives you should be used to keep your accounting information accurate.
5. Use credit prudently.
Having a credit card is not the same as spending cash for an item. You should use this business credit line prudently. Make sure all charges are business related and essential.
6. Keep track of the rewards programs.
Credit cards offer card holders benefits and rewards. Research the card you are applying for and decide if you are getting the rewards that are most beneficial to your business.
7. Issue employee credit cards.
You can keep track of employee expenses by issuing credit cards. You will be able to keep track of all money spent via your credit card statement.
8. Early payoffs are best.
Try to keep track of your expenses so that you can pay the total amount off before the grace period. You can save the money incurred by interest if you do. Ask your bank holder how long your grace period is.
9. Monitor the business account on a consistent basis.
Be sure to check the account to make sure the items listed are accurate. Go over the charges and validate they are correct. Sometimes banks and creditors make mistakes. You want to be sure there are no overcharges on your account. If your bank offers online services, go online for complete access.
10. Eliminate cash advance usage.
Know that the cash advance option does not fall under any grace period. Those fees are instant and the interest along with the fee applies at the moment of transaction. A better option would be just to charge the amount to the card itself and resolve to issue payment prior to the grace period.