Your Business Credit Card and You
If you own a small business, you probably carry a business credit card.
If you use it as a tool, it can be a huge asset. It can help you see exactly where your money is going, and it can carry you through those times between you needing to pay a bill and your customers’ payments coming in. It can even save you money by providing rewards for items that are essential to running your business.
Some rewards credit cards will give you cash back for gasoline, restaurant meals or air travel, while some will provide rewards for buying office supplies necessary to your business. Just make sure you use it for items that really are necessary – don’t spend to get the rewards.
Also, as tempting as it may be, never use your business card for personal expenses. If you do, the IRS will declare the interest you pay on that credit card as non-deductible. So unless you buy your uniforms from Macys – don’t use it there!
The only safe way to use a business credit card is to pay it in full each month. Unless your business has suffered a true emergency – such as the transmission going out on your delivery van, or the furnace in your store blowing up – you should never use it for purchases that aren’t in the budget for the current month.
Getting into debt is a huge mistake that small businesses make – and it’s so easy with a credit card in your pocket. You can convince yourself that you really “need” a better looking desk and a nicer chair – or that your computer simply has to be upgraded this year – or that those motivational posters are important.
But the truth is, the only things you really “need” to spend on are:
- Things that make it possible to do business, such as the raw materials for your products, your employees, your rent, your power, and your phone.
- Things that improve your service and bring you more customers / profits.
- Marketing your business. But beware in this area. With easy credit, it’s easy to fall for advertising schemes that don’t return a dime on your investment.
In today’s credit climate, running up huge balances is downright dangerous – especially on a business credit card. Why especially? Because business Credit Cards don’t fall under the provisions of the CARD Act of 2009.
That means your credit card issuer can change the interest rate on your existing balances. If you make a mis-step, such as running your balance too high, your beautiful 5.9% interest rate could suddenly become 25.9% Worse, you don’t even have to make a mis-step. They can do it for no other reason than they want to earn more profit.
What would that do to your business? Would that additional interest put a serious drain on your monthly profits? Be careful.
