How to Use Small Business Credit Cards


Small business owners, often receive numerous offers and applications for a small business credit card. Having credit card can be a convenient way to increase your company’s purchasing power, giving access to a revolving line of credit.


Here They Are

Small business credit cards gives business owners easy access to a recycling  line of credit with a set credit limit in order to buy  and withdraw cash. Just like a consumer credit card, a small business credit card carries an interest charge if the balance is not paid back in full within each billing cycle.  Credit card  can be gotten through your bank or you can compare cards features and terms after which you  may apply online through our credit card tool.

A business credit card can be an easy way to quickly have access to finance for short-term needs and can increase your company’s procurement power. They are mostly marketed as a smart alternative to a traditional line of credit. A business credit card comes at a cost and must be carefully used like any source of financing.


Effectively Using a Business Credit Card

It can be difficult if a good system is not in place to keep  track and keep a handle on credit card spending. This will unavoidably affect our bottom line. Strategies are to be in place to guaranty good credit card usage.  


Enforce Accountability

John Burton, CEO of Moonshadow Learning Service a leadership development company near Asheville, N C said “The most important step a small business can take to make sure credit cards are used effectively is to set up a bomb-proof accountability system.”He continue, “This could mean everything from pre-approval of all credit card spending, to rigorous requiring of receipts, to pulling credit cards from those who do not report completely and on time with receipts,” Put a system in place before the first credit card arrives, be consistent, rigorous and fair, and do not welcome any exceptions says Burton.


Choose Who Receives a Card

Employers are often faced with the challenge of who  receives a credit card. This is acknowledged by Burton.”I’ve seen businesses that lost control of credit card spending by issuing too many cards to too many people, and thinking that all important officers and travelers needed the convenience of a company credit card,” Giving all employees a credit card might seem to be right and easy, but it can lead to expensive system, dysfunctional and serious lack of accountability and control.


Explore alternatives and establish rules. Companies with sales people, reimburse employees for company spending on personal credit cards with excellent accountability i.e. “no receipt, no reimbursement,” says Burton. This is helpful, however, deciding who gets credit cards should have a clear rule.It can be based on seniority, position or job function. This will help avoid confusion and eliminate bad feelings from employees who would like a card, but are not qualified.


Set Limit or Boundary

It is very important for every business to have clear policies about spending, including which expenses can be put on cards, how much can be spent and how often the card can be used. This policy should be written and each card user should read, sign and have a copy for reference.


Based on the business card, you may be able to set up restrictions that limit transactions to a certain  amount, category of spending, days and times. With some cards, you can set up restrictions for each employee. For instance, you may limit one employee to $100 a day any day of the week for gas purchases, while limiting another to $150 for gas and $60 for meals each day, but only on business days.


Be Observant

Many business credit cards gives you access to set up activity alerts that arrive as text or email messages. The alerts can be set up to alert you each time a transaction takes place, or only if an employee uses (or tries to use) a card in an unauthorized manner. You can also make us of  online and/or mobile banking to view up-to-the-minute account activity. The accounting department should consider each statement to make sure each line item is a charge you approved.


Make Use of Credit Wisely

Although credit cards are easy to use, they are not advisable to use especially for large expenditures that can not be fully  paid in  before interest kicks in. Notwithstanding what it takes to get credit from the bank or other lending institutions, it often makes financial sense to do so considering the fact that  interest rate on credit cards is typically much higher than a secured debt instruments.Also  large purchase or a couple of large expenditures can eat up your credit card and leave you without a source of funds at all.


Pros Business Credit Card

In addition to providing necessary cash flow to help maintain, run and build your business, credit cards are of these importance:

Easier to Qualification – It is  easier for business owners who do not have a well-established credit history to qualify for a revolving line of credit with a credit card, rather than a traditional line of credit or bank loan.
Convenience: Credit cards provides ultimate financing convenience. Business owners can quickly access funds for transactions like purchases or cash withdrawal, much more easily than having to find cash and/or use a checkbook.
Financial Cushion: Business owners fall back on credit card when accounts receivable are behind, or sales are slow and the business is short on cash.

Online Ease: Good to know, business owners make purchases and do business online with vendors, contractors and suppliers. Using a credit card makes online transactions a lot easier.
Bookkeeping Assistance: Business card owners are provided with monthly statement with online  record-keeping tools to manage their accounts, including a year-end account summary which can help a bookkeeper track, categorize and manage expenses. It simplify bookkeeping, help when using outside professionals to navigate an audit and pay taxes, and provide an easy way to monitor employee spending.

Incentives and Reward: Most cards offer business owners rewards programs  including airline miles and shopping discounts for using the card. Others provide “cash back” incentives, repaying card holders certain percentage of their purchases. It can pay to choose carefully.

Means to Build Credit: Carefully, using a small business credit card will help in paying the bill on time, paying more than the minimum due, and not going over the credit limit can be an easy way in building up a positive credit report for your business. It  can help you be more likely to qualify for a loan or line of credit, and at a potentially lower interest rate, in the future. Bear in mind that not using a business credit card responsibly can damage your credit.

Cons of Business Credit Card

It’s important to consider these potential downsides before rushing to apply for a business credit card:

It Is More Expensive: The expediency and ease of small business credit cards has a price: They have a much higher interest rate (1-3% over prime) than a small business loan or fixed line of credit offered by a bank or financial institution. That interest can add up quickly if by chance card activity is not repaid on time and in full each month. Additionally, if not with a system to regularly and carefully monitor card usage, it can be easy to accidentally overextend your firm financially by going over your firm’s credit limit or incurring late fees or penalties.

Personal Legal Liability: Most small business credit cards require individual personal security  (a personal-liability agreement) to repay debt. It simply means that any late or nonpayment could result in a negative personal credit report and the inability to personally borrow money. You  may have to pay more with a higher interest rate.
Security Issues: Security measures should be in place to ensure that cards or card information is not exposed or stolen by employees, vendors, contractors and others who come through the office space. It’s also necessary to ensure that employees that are authorized to use the card do not use the cards for personal spending, and that they take security precautions when making online transactions to avoid being hacked.

Less Protected: Very often, small business credit cards do not carry the same protection as consumer credit cards. For instance, many cards will not give the same level of assured services when disputing billing errors or needing to make merchandise returns. Be very sure to review what level of protection and services a card offers before going for it.
Unstable Interest Rates: Different from a loan or fixed line of credit, the credit card issuing company  can reset the interest rate on your credit card depending on how you use and manage your account. Considering that, it can pay to be aware of how rates work and can change.


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