The use of a business credit card is not only a convenience but also an excellent way to keep an eye on your expenditure. You are also likely to be popular with your accountant too as his workload will be lightened considerably by less cash transactions when he is preparing your tax paperwork.
However, no matter why you choose to have a business credit card, there are still some things you need to know. For example, annual fees for business credit cards are generally higher than those for personal credit cards.
You could find yourself paying as much as $150 per annum for cards with extras but if you simply need a credit card to make basic purchases, you would be best choosing a card offering an introductory interest free period.
Getting a business credit card with an interest free period allows you to avoid paying interest for the specified length of time. Some cards offer twelve months interest free which can save your business a significant amount of money. If you currently have a credit card with a high balance, you can even transfer your current balance to your new introductory rate card and immediately save significantly on your monthly payments. In other words, you have the benefit of an interest free loan for the term of your introductory period.
It is very important to pay your credit card account by the due date, which is clearly listed on your statement to avoid often high late payment penalties. There are also some credit cards like American Express which require payment in full every month, so it is important that you understand the payment terms of any credit cards you are considering before you actually apply for one. You may also be penalized by an increase in the annual interest rate you are charged.
The Annual Percentage Rate (APR) is the amount of interest you are charged on the balance outstanding on your credit card. Choose a fixed rate as opposed to a variable one so that the company is not given the option to up your rate of interest for a late payment. This way you can at least keep an eye on your budget. There is nothing to stop you shopping around for a new interest free or low rate introductory offer card if you find yourself paying higher interest rates than you can afford. You are often allowed to transfer balances as an incentive to take out a new card and this can save you quite a large amount of money over a period of time.
Business credit cards can also be used to obtain emergency cash for your business. However, the interest charges for cash advances tend to be higher than for purchases and you will be charged this high rate for as long as the equivalent amount of your advance remains on your statement. This can end up being quite expensive so it is a good idea to minimize your use of the cash advance option to genuine emergencies.Your business credit card can contribute to the smooth running of your business, so when things go wrong they need to be dealt with quickly. It is a good idea to have the contact numbers of your credit card provider on hand so that you can solve problems without delay. You may also be able to find answers to any questions on your provider’s website. Look for a ‘Frequently Asked Questions (FAQ)’ page and scan the questions to see if your concern is listed. You may also be able to directly contact the company with your concerns via their website. However, as long as your credit card company has a reasonably quick telephone response time, it may be easier to simply contact them by phone. It is a good idea to test out a company’s customer service before actually applying for a card with them.
Be sensible when considering applying for a business credit card. For example if you are running a small DBA business, you may well not need a credit card. As the credit will be built under your social security number, you have to be sure than you can manage the debt in an effective manner.