Select your business credit card (s) with great care, if you are starting a new business now or are now just getting your first business card. By selecting and managing the right business card, you can help build your business’s credit.
Here are 15 key tips to keep in mind regarding your business credit card(s):
Your Business Credit Card
- When you apply for a business credit card or cards, select cards that will benefit you the most. Look over your financial books to determine where you spend the most money each month. Is it travel? Is it printing and promotions? Where do you spend your money? Then find a card or cards where you can save the most money or gain other advantages, such as a terrific rewards program. For example, some cards may give you back 5% on wireless phone service charged to the card or dollars off on Fedex shipments. Determine where you have the best advantage and go after those business cards.
- Some cards will charge you a moderate annual fee and some of them charge a hefty annual fee of $150, but don’t eliminate them immediately until you do the math to determine which card or cards works best for you. Even with the $150 fee, you may get the best savings or convenience from them.
- A card that charges 0% for a certain number of months might make the most sense if you need to make purchases of office furniture, for example, that you will not be able to pay off at the end of the month.
- If you spend a lot of time at the airport, you might want to get a credit card that will allow you free lounge services. That could make all of the difference to keep from getting exhausted on long business trips with all too frequent delays.
- If you need to supply credit cards to your employees, use cards that have a preset limits on them and then when the statements come in, monitor them with care. It’s your money!
- Find a card that will easily itemize all of the charges for the year at the end of the year. This is an easy way to calculate deductions on your tax returns and its saves many, many hours of work.
- Don’t apply for too many credit cards because even the application process can hurt your credit score and you want that to be as high as possible.
- Apply for your business credit card at the bank where you have your personal accounts. They know you there and they know your payment record and may make the best deal with you because they don’t want to lose your business to the competitor.
When you get a business credit card, you may be surprised to learn that the credit card company does not report the bill on your personal credit report, but that does not mean you are not personally liable for the debt. Many credit card companies won’t report this card on your personal credit report unless or until you fall behind on payments. Most of the time, even though it is a company card, you are responsible for all of the debt.
- Stay very attached to your company money, including the amount you can borrow on your company credit card. There is a tendency to become less attached to company money, but the smart business person will hold on as tightly to it as he or she will to their own personal money, because ultimately, it is your money that you will need to pay back. Don’t buy overly expensive items for your company that you wouldn’t buy for yourself.
- Pay off the credit card every month. Don’t use it to fund normal, everyday expenses at the company. If you are using the credit card to pay the rent or other standard expenses and then not paying off the card in full at the end of the month, you are spending more than you make, which is unsustainable. Unless there is an emergency or huge opportunity, never spend more than you make because you are heading for business disaster. Cut costs now while you still can.
- Continuously watch your interest rate on your credit card. Know the rate you are paying by heart so that every month when you check your credit card statement to ensure it is accurate, you can also take a quick look to the interest rate you are paying. Naturally, if you are paying off the card at the end of each month, you should not be chalking up any interest charges, but that is beside the point right now. We don’t want you now or in the future to be subject to any sneaky new charges. If you find that your interest rate has jumped form 8% to 9% — even if you have not been charged the new, higher rate because you pay off your balances — call up the credit card company and demand to know why. We suggest that you have more than one company credit card because if one company increases your rates and won’t back off, tell them that you will not use the card any more until they do.
- Question all random charges on your credit card. A reader told us that he typically carried debt on his business credit card and never looked at the charges too carefully. One month he paid off the entire bill. The next month he did not use his credit card, but got a billing statement anyway. There was a single charge on there for $12.41. What was that charge? He wanted to know. He called the company and asked about it. He was told it was a “processing fee” that the company charged every now and then. Without even asking further, the voice at the other end volunteered that he could remove the charge. While our reader still had the credit card company on the phone, he reached for his folder where he kept monthly statements from this credit card company. They had charged him this processing fee monthly for the past two years. He demanded that they be removed, which they were. He also demanded a call-back from a supervisor to determine where these processing fees came from. He said that it wasn’t a great deal of money, but it was his money. Now he checks monthly on all of his statements for any odd fee.
- Know and always use the grace period on your credit card. If you have 21 days to pay the card before interest will be charged, then make sure you pay on time, but not too early to help your cash flow. The mail sometimes takes a long time for a letter to arrive, so pay online to ensure that your payment is there on time.
- Never make a late payment on your credit card. To avoid this, create an auto-pay for the minimum balance due. Then at your leisure, write out a check for the remaining balance.