A lot of the successful businesses that we know today were built on funding provided by business credit cards. Used the right way these types of cards provide business owners with the funding and the resources that they need to grow successful businesses.
Here are a few pitfalls that you should avoid with your business credit card:
Avoid Interest Charges
Paying off your balance monthly might seem like a difficult goal for small business owners but it is important to try to bring the balance down as much as possible in order to avoid paying high finance charges. One way to do this is to keep spending limited to only what is necessary for the business. This way you won’t have an unmanageable balance to start with.
Some business credit cards, especially the reward type cards have higher rates of interests so beware of the purchases that you make.
Avoid Using The Card To Purchase Personal Items
Using your business credit card to make personal purchases complicates the accounting. One major benefit of business cards is that the accounting would be a lot more streamlined if all the business expenses are placed on that one card. The purchases can then be classified into categories and the data can then be imported directly into your accounting software.
When you place personal items on the business card you now have to take a note of each of these charges and pass them onto your accountant so that they’re not included with the business expenses. Added to this, further complications are created when you leave a balance on the card and those personal purchases accrue interest. To avoid these complications use your business credit card for business purchases only.
Use the Credit Limit Wisely
Business credit cards usually have higher credit limits than personal credit cards. Even though the credit limit might seem to be a lot you have to keep in mind that anything you charge must be repaid. If you do not pay of the balance you will also be responsible for finance charges also.
To avoid problems later on purchase only the things that you really need for the business with your credit limit. Your spending should always be in line with your business growth.
Avoid Late Payments
Avoid costly penalties, especially those associated with business credit cards by making your payments on time. Paying on time comes with the added benefit of establishing a good credit rating for your business, so don’t miss this opportunity to do so. A good credit rating will come in handy later on when you decide to apply for a business loan.
Closely Monitor Employee Cards
Some business owners take out extra cards to give to employees who make business purchases. Even with preset limits on these extra cards it is important to keep close track on the spending. Remember that when all is said and done you as the business owner will be held liable for all purchases made on the account.
Understand The Terms and Condition of Your Business Credit Card
Business credit cards are similar to personal credit cards in some ways but they are very different in a lot of other ways. The fees, reporting and requirements could be quite different. This is why it is important to read and understand the terms and conditions before you apply for the credit card.