By Jason Bushey
It's
just a fact that many (if not most) American businesses run on
credit. Business credit cards are the small business owner's main
source of readily-available cash, plus they build up a company's
credit while allowing business owners to earn rewards.
But
just like individual consumer credit cards, there are some things you
should and shouldn't do with your business rewards cards.
Do
consider the rewards opportunities
Many
business rewards cards offer bonus cash or points for purchases made
in specific categories such as office supplies, Internet and phone
services, and other office-oriented products. Another kind of
business card rewards all purchases with a standard rate of points
and miles for all purchases.
Depending
on what your company spends the most on, it might be more fruitful to
go with the card that rewards more for specific categories than the
one that rewards all purchases the same, especially if you find that
the majority of your expenses keep going to the same categories. But
if not, make sure you're at least getting some kind of rewards from
your business credit card.
Don't
apply for a charge card if you're short on cash
There
are essentially two categories of business cards - credit cards and
charge cards. Business credit cards work identical to consumer credit
cards, in which individuals are approved for a credit line and are
given the opportunity to pay back some or all of their balance once a
month.
Charge
cards are different in that they require the entire balance to be
paid at the end of each billing cycle. So there’s no interest
attached to these cards, but businesses are not given the option to
pay back a fraction of their debt.
Charge
cards are great for established businesses hoping to earn rewards for
the purchases they plan on making anyway. But if your company is a
start-up short on cash, a credit card with a real credit line is more
than likely the way to go.
Do
sign up for employee cards
Employee
cards give your employees the opportunity to earn your company
rewards while strictly limiting their spending. Employee credit cards
organize expenses without the risk of one of your employees running
up a tab on the road. Plus, many business credit cards offer bonus
points for opening one or more employee cards, so there’s
essentially no downside to opening even just one.
Don’t
run up a huge tab on one card
Rather,
spread your spending out over two or three business credit cards to
make sure all of your debts are in good standing. The higher the debt
attached to a card, the higher the minimum payment required each
month. Keep your minimum payment low and your credit utilization
ratio down (the amounts you owe in relation to your total available
credit) by keeping multiple business cards open and in good standing.
These
are some of the basics when it comes to what you should and shouldn’t
do with your business credit cards. But like any form of credit,
ultimately the concept is simple: Keep your debts low, make on-time
monthly payments each and every month, and only open credit cards
that you’re positive will be beneficial to you and your company.
* Image license: Royalty and attribution free
