5 smart ways to use your business credit card
If you are a business owner, chances are good that you have a business credit card. You need to manage your business credit card just as carefully as your personal credit card. Put your business credit card to good use by following these five tips:
Remember it’s business, never personal. Some financial pundits actually recommend using your business credit card for personal expenses because it minimizes your personal credit activity (your FICO® score relies heavily on the amount of available credit you have).
This, however, can create serious issues. The interest and payment rules and penalties for business credit cards are different than personal cards, and mismanagement can lead to catastrophic results.
“Small-business credit cards work well for an established business with a healthy, dependable monthly revenue stream,” Janna Herron of Bankrate.com writes. “But, like a consumer credit card, it’s important for your business to be able to pay the entire credit card bill in full every month to avoid accruing more interest debt. This can be tough for new business owners who must balance their optimism with reality.”
Ask questions. At Northwest, we work closely with you to help select services that best fit your needs. Before signing up for a business credit card, make sure that you ask any questions you may have. It’s important that you understand your credit card agreement.
Be aware of any fees and due dates – being conscious of these details will help you avoid penalties.
Northwest has multiple options to help make sure you are making payments on time. You can set up automatic payments or pay at any Northwest office, online, by mail or by telephone.
Create and monitor financial statements. As a business owner, you need to keep track of where you stand financially each month. By preparing accurate and up-to-date financial statements, you’ll be able to figure out if you have enough capital to pay all of your debts. This will allow you to create an appropriate budget for your business credit card and stay within budget.
Consider making all business transactions on your business credit card. By putting all of your business expenses on your business credit card, you’ll be able to easily keep your business transactions in one place. This is useful for your personal records and as a resource to show creditors and the IRS. You’ll also earn valuable rewards points! Remember the importance of paying the full balance monthly.
Establish an accountability system. When you have a business credit card, you have to create a clear and concise plan for using it. The first step is to decide who gets a card. In addition, it’s useful to design a usage policy appropriate to your business’s needs. This can include pre-approved spending, setting spending limits, checking all receipts and reviewing all transactions.
Northwest Business Visa® Credit Cards allow you to set spending limits for each cardholder and review separate statements to monitor their expenses. Everyone should understand the system, so include a penalization policy if someone abuses it.