How to Use Your Small Business Credit Card Responsibly

Posted by Factor Funding Co. on December 28, 2012

While the popularity of small business credit cards has risen in the past couple of decades, some entrepreneurs still shy away from obtaining them. These business owners may be concerned about the possibility of running up a large amount of credit card debt, which could happen with unrestrained credit use. However, there are several advantages to using a small business credit card. The key to benefiting from this business financing option, though, is learning how to use your small business credit card responsibly.

 

Why Obtain a Small Business Credit Card?

Despite the concerns of some business owners, small business credit cards offer many benefits. For one thing, getting a credit card exclusively for your business will make bookkeeping and income tax preparation a breeze. You'll be able to download itemized statements from your credit card company at the end of the year that separate your expenses by type, which will streamline your tax deductions.

Another reason to get a small business credit card is that you'll be eligible for exclusive rewards programs that are offered by some finance companies. If you use the card regularly for business expenses, you might be able to rack up rewards points quickly, which you can then redeem for checks or gift cards that you can use in the course of business.

How to Manage Your Card Responsibly

Of course, all of these benefits will be moot if you're unable to effectively manage your credit. One way to avoid credit troubles is to avoid the temptation to transfer debt repeatedly. While a balance transfer offer with a low or no interest rate may sound good, opening up several credit accounts in a short period of time can negatively impact your credit rating.

To keep a handle on your debt, you should also stay away from the cash advance option. The interest rates and fees associated with cash advances are often extremely high. For example, the interest rate on a cash advance may be three times the nominal rate for purchases, which could make it difficult to pay off the debt.

You should also make your payments on time and within the grace period, if possible. It's best to pay off your balances within the grace period each month, so that you can avoid interest charges. However, if you absolutely must carry a balance for a time, be sure to remit your payments on time to avoid late charges and over-the-limit fees.

Knowing how to use your small business credit card responsibly is an essential part of operating your business effectively. With this information, you'll be able to reap the benefits of having a small business credit card without the debt or credit troubles that often accompany credit card use.

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