Do you use one or more business credit cards to finance your business’s operations? Like personal credit cards, they are essentially lines of revolving credit. You can use a business credit card to purchase goods and services up to a given limit. As you pay down the business credit card, you’ll free up some of the available credit. Here are six best practices to follow when using business credit cards.
6 Best Practices to Follow When Using Business Credit Cards
#1) Don’t Apply For Too Many
You should avoid applying for too many business credit cards. Each application will result in the lender running a credit check. There are hard credit checks, and there are soft credit checks. Hard credit checks — the most common with credit card applications — can hurt your credit.
#2) Look for Rewards
Many business credit cards have a rewards program. When you purchase goods or services with a business credit card, you’ll typically earn points. After collecting enough points, you can redeem them for cash or other rewards. If you’re going to open up a new business credit card, you should look for rewards such as this.
#3) Only Charge What You Can Pay Off
You should only charge what you can afford to pay off. Business credit cards aren’t a viable alternative to loans or other traditional forms of financing. They often come with higher fees and higher interest rates. As long as you pay off the balance, fees and interest shouldn’t hurt your business’s financial health. But carrying a balance month after month is a different story.
#4) Beware of Interest Rate Changes
Speaking of interest rates, you should beware of changes to your business credit cards’ interest rates. Most credit cards have an adjustable interest rate. As the federal funds rate changes, lenders will make adjustments to their credit cards’ interest rates.
#5) Set Up Automated Payments
Rather than paying off your business credit card bills manually, you should set up automated payments. All major credit cards support automated payments. Once set up, the lender will automatically withdraw money from your bank account on a specified date.
#6) Don’t Mix With Personal Expenses
Business credit cars, of course, should only be used for business expenses. You shouldn’t use them to cover personal expenses. For personal expenses, open a separate personal credit card. Keeping your business and personal expenses separate will result in cleaner financial books that are easier to analyze.
This article was brought to you by Intrepid Private Capital Group, a Global Financial Services Company. For more information on startup and business funding, or to complete a funding application, please visit our website.
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