When you get a credit card for your business, you assume a new responsibility for the business. You’ve got a new, powerful way to get the supplies your business needs, but you’ve also got to make sure that you make payments on time, and avoid letting your business credit card debt get out of control. Here are some ways to make sure that you get the most out of a business credit card.
Buy and Pay Quickly – A great way to build credit for your business is to use your business credit card to purchase small things that you know you’ll be able to pay off in full when the bill arrives. Use it a couple times a month for a tank of gas, and then pay it off immediately when the bill comes. This ensures that the business credit card you get will be leaving a good trail of credit behind you. It also ensures that you won’t be carrying forward a balance that will cost you more and more as time goes on.
Take Advantage of Introductory Rates – In the same way that you can avoid accruing any debt by paying your business credit card’s bill on time every month, you can do a similar thing with the 0% introductory interest rates that many card companies offer when you sign up for their business credit card. Mid-sized purchases are good candidates for this strategy. Here’s how it works:
Let’s say you need $2,000 worth of new supplies for your office. If you get a credit card that offers you 6 months of 0% interest, you can pay $334 each month of that first six months and get out of your debt to the credit card company without having to pay any fees at all. With this strategy, you can use a business credit card simply as a way to extend your payment period on expenses risk-free. You should avoid doing this too often, though, because opening and closing many credit accounts, or even having many credit accounts open, is bad for your credit score.
Leave it At Home – Everyone, even highly rational business owners, inventory managers, and no-nonsense bookkeepers, are subject to the impulse buy. It happens to the best of us, and it’s no surprise. Entire industries are based on impulse buys, and they spend some big time advertising money to make sure that your impulses keep right on pulsing.
So do yourself a favor: leave your business credit card at home. It’s a great tool for helping you to afford things that your business can’t pay cash for, but a business credit card can be a temptation you don’t need when you’re trying to budget for a whole year of business.
It’s especially important that you don’t bring your business credit card with you to hot-spots of business-y impulse buys. Office supply stores, stores that sell products that you use often, and other places where you might be especially open to a good sales pitch for a product you didn’t go there to buy.
Limit Yourself – Don’t get more than one business credit card unless you absolutely need to. And close any business credit cards that you are not using and don’t plan to use again. As stated earlier, having multiple open accounts sitting in limbo is not good for your credit score. Just be sure not to close ALL accounts at once because that will also harm your score!
Under certain circumstances, it could make sense to have two different cards. Certain businesses may have a unique combination of needs that could be well served by having different types of business credit cards. Perhaps you need a card that will help you save money on traveling. You could get a card that rewarded your purchases with frequent flyer miles and use that to buy most of your small expenses. That way even if the interest rate is high you could pay it off in full every month and still be building up benefits.
But, you might also need to buy some equipment for your business. In this instance using your business credit card that rewards you with frequent flyer miles might not be the best idea (since the interest rate on these cards tend to be rather high). You might want to have a separate card whose only major benefit is a low interest rate. You could use this one to carry a balance forward without costing your business quite as much in interest over the long term.
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