If you are starting your own business or running a small business in any way, you have to think about using business credit cards. Why get a business credit card, anyway? What advantages do they offer over cash? In this brief article, we’ll talk about reasons why utilizing a business credit card can be so beneficial for your business. Hopefully by the time you’ve finished reading this, you’ll have a better understanding of what a business credit card can do for you and your business.
Cash vs. Business Credit Cards Cash is king…for now, at least. When you are the only option for obtaining a line of credit (other than borrowing money from family or friends), that’s when cash is king. Business credit cards give small businesses a convenient way to access additional funds without having to pay the high interest rates associated with cash.
For example, consider that credit cards often come with an introductory period of as much as twelve months. During this period, you pay no interest on your purchases, but must pay an insignificant one percent interest rate on the purchases you make during this time. Granted, this interest rate may be extremely low compared to the interest rate on other forms of credit, but remember that when this introductory period ends, you will be paying interest on the outstanding balance.
Small Business Credit Cards Separate credit cards are another way to boost your small business credit rating. These separate credit cards are not attached to your personal credit rating. Your personal credit rating is determined by two factors–your debt-to-income ratio and your credit score. By using separate credit cards, you can separate your spending and improve your debt-to-income ratio while boosting your business credit rating at the same time.
Before applying for a business credit card, it is important that you know what your spending limits are. Some cards offer frequent flyer miles, while others give you the flexibility of charging items for mileage that you actually do not use. If you are unsure of your maximum spending limit before applying for a card, find out the maximum by adding up all of your monthly purchases and dividing them by the number of days you typically spend. The number of miles that your credit card allows you to charge before the statement date can help you determine which cards are best suited for your spending habits.
Once you know what your spending limits are and you have determined which credit cards are best for your spending habits, you should start reviewing the perks. Most credit cards offer different types of perks, such as airline miles, cash back or department store items. If you already have many of these perks on your personal credit card, then you may not be able to save much money by applying for a business credit card.
If you frequently travel, then you should look for a credit card issuer that offers frequent flyer miles. These can help you make purchases when you travel, which may not be possible if you are not a regular traveler. Department store cards also often offer frequent flyer miles or rebates on items that are purchased. However, these rebates will only pay off if you make purchases in the store.
In general, the more perks a credit card offers, the more likely it is to be popular among small businesses. Applying for a credit card with a rewards program may allow you to get special discounts, free items and even cash back. Some business cards offer huge points that can be redeemed for gift cards, plane tickets, or even paid vacations. If you plan to make purchases using your credit card for business spending, you should look for a card that offers a decent rewards program. These rewards programs can save you a lot of money on the purchases that you make.
Business credit cards have many benefits. Although business credit cards generally carry an annual fee, sometimes it is actually quite minimal. Some of the benefits are clear in these business credit cards, such as: Higher credit limit. These cards often carry credit limit of up to £50k, which makes it easier to purchase large business-related purchases that you wouldn’t be able to make with your own credit card or cash at the same scale.
Most business credit cards also offer separate cards for employees. This way, a small business owner can easily track all employee’s expenses and know which employee is spending more than what is his or her limit. With this feature, the business owner can easily discipline employees who spend beyond their limit.
Using these cards also has benefits. Aside from offering an option to purchase products and services at wholesale prices, business credit cards also help in record keeping. If you have a system in place for recording your company expenses, you can easily calculate your company expenses in terms of pounds. This way, you can determine how much you need to allot for your company expenses every month. You can also use this information to calculate your company credit capability and keep track of your financial transactions.
When it comes to business expenses, you have to allot a bigger amount than usual because you will be spending more for your company. As much as possible, you don’t want to end up with a lower credit rating so better make sure that you won’t be tempted to spend too much. Business credit cards come with higher limit purchase protection as well as other perks. If you really want to enjoy those financial benefits and convenience, then it would be best if you get a business credit card.