Should You Carry a Business Credit Card?
If you have a small business, yes – you need a business credit card.
Business cards often carry lower interest rates and higher credit lines than personal cards, but that’s not the only reason. In order to qualify, you’ll have to be set up as a business, with a business name and possibly an Employer Identification Number.
You’ll need a business address and phone number – but these can be at your home if you are running a legitimate business from your residence. Many people such as building contractors, excavators, landscape artists, and freelancers do have offices in their homes.
You’ve probably read enough about taxation to know that the interest on your personal credit cards is not tax deductible. But interest on business expenses is deductible, so if you carry a business credit card and use it for nothing except business expenses, the interest you pay will be a deduction. And when it comes to tax time, every deduction counts.
If you slip and use that business card to buy the kids’ new shoes, you’ll be out of luck. So if you may need to carry a balance, be careful not to use that credit card for any kind of personal expense. If there’s an expense that could be viewed as personal – such as concert tickets or a restaurant meal – be sure to document the event in your day planner. Note the names of the clients or customers you were entertaining, along information about the business discussion that took place.
Secondly, business credit cards often give benefits such as year-end accounting. You can see at a glance how much you spent on gasoline, office supplies, entertainment, etc. If you give credit cards to your employees for business use, the reports will also tell you how much each employee has spent, and for what.
Your monthly statements are also broken out to show how much each person spent, and where they spent it. This is an excellent way to monitor employee activity and rest assured that your credit is not being used inappropriately.
Then there are the rewards. When business cards offer a rewards program, you get benefits for making those purchases that are essential to your business. Who doesn’t want a little cash back on necessary expenses?
Major credit cards aren’t the only ones to offer benefits to cardholders. Retailers like Staples™ will send you a rebate check at the end of each month based on the previous month’s charges – and will often offer extra cash back for buying their brand. They also mail out “free” coupons to entice cardholders to try new products.
