In this post, I will show you 7 business credit card tips for small businesses.
Business credit cards come with multiple benefits, apart from providing you the cash to help run your business. They help build a good credit history, provide a large number of rewards and perks, and keep track of the employee expenses.
Though this sounds like a great proposition, it could end up being a burden if not managed properly.
Given below are seven tips that will help you manage your business credit card wisely.
Table of Contents
7 Business Credit Card Tips For Small Businesses
1. Use It Only For Business Expenses
Business credit cards are a great way to split business and personal expenses. Using a business credit card for personal uses can prove disastrous, making it difficult during bookkeeping and audits. It is also essential to know when to use them.
It is advisable not to use business credit cards for large expenses that cannot be paid back in full before the interest rate starts piling up. The main reason for it is that the interest rates for business credit cards are higher than that of personal credit cards.
2. Responsible Usage
A credit limit has to set for business expenses. It is preferable to mention it in the company policy about how much an employee can spend on business-related purchases. Many companies provide such services where they draft policies according to the needs of the company.
There can be restrictions set for transactions up to a specific limit, products that are to be purchased, and date and time. It is also applicable to individual employees. Doing this will prevent them from making unwanted purchases. Such purchases will reduce your credit score, as will missing your monthly payments.
Every business should have a fool-proof accountability plan to ensure that the business credit cards are put to the right use. This can be made sure by making it mandatory to submit proof of receipt every time a purchase is completed and applies to all the employees working there. Also, providing business credit cards to employees based on their seniority level and not helping reduce unnecessary expenditure and avoid confusion.
4. Making Use Of The Rewards And Benefits Provided
Most of these business credit cards come with benefits like 0% APR, sign-up bonuses, rewards, and perks. 0% APR refers to the policy where no interest is charged on purchases made during a specific period. Sign-up bonuses are nothing but cash prizes given when a certain amount of money is spent using your credit card.
However, it would be unwise to spend a considerable amount beyond your budget to get a cash prize. It is also advised to purchase a card that benefits your business by providing rewards on a specific product category. Many of them also provide benefits like car rental insurance, warranty, and protection.
Rewards can be divided into tiered bonuses and fixed-rate rewards based on purchasing habits. Tiered reward cards can be used by businesses that purchase one specific type of product. Fixed-rate reward cards are of use for companies that purchase a variety of products.
5. Monitoring Card Activity
The credit card company sends notifications to you as a text or an e-mail every time a purchase is made using the card or if an unauthorized purchase is made. Online and mobile banking services have made it easy to keep a check of your account activity from anywhere.
Read more here about credit card validators that can help you monitor your card activities. As mentioned before, purchase details are to be noted for future reference and monthly billing cycles.
6. Report Unauthorized Transactions
It is wise to report unauthorized transactions immediately to the card provider. You are advised to do this to prevent you from paying unwanted charges for a transaction that was never meant to be made on behalf of your business. When you are notified of such a transaction, you are to report it to the company, which will block your card and secure your account.
7. Don't Close Your Account
When you close your business credit card account that you have had for quite some time, your credit utilization ratio increases- in other words, the ratio of the amount of credit you are using to the total credit limit increases. This results in your average account age being reduced. This affects your credit score. Hence, it is advised to keep your account open and not to use your card.
Voila! The 7 business credit card tips for small businesses.