There are many advantages to using credit cards to finance your business. However, they must be used wisely in order to be beneficial, otherwise, they can quickly lead your company into debt. Here are some tips to help your business use the company card more wisely.
Maximize Rewards Points
Business credit cards come in various types, including rewards credit cards. Rewards cards offer cashback for purchases, vouchers, points, etc. For instance, some cards offer cashback for paying utility bills or dining out. Your company can save money with a cashback card.
In addition, credit cards that offer rewards can also be a benefit when used correctly. For this type of credit card, make sure that the rewards program matches your business needs. If you and your employees travel frequently, then look for cards that offer rewards for flights, hotel stays, car rentals, etc.
Always Pay The Full Balance On Time
While this may seem obvious, if you don’t pay the entire balance on your business credit card, the card provider simply forwards the outstanding balance to the next month once you’ve paid the minimum amount due. Managing your company credit card in this way can quickly lead to high-interest fees on the outstanding amount, costing your company a pretty penny.
In addition, paying only part of the balance each month can damage your company’s credit score. This can make you look like a risky investment when it’s time to apply for a loan. And if you don’t pay on time, the card issuer will likely increase your interest, which will cost the company even more money.
Paying the full balance on time each month, on the other hand, can help improve your credit rating. The business will also look financially responsible, making it easier to get a loan when you need it.
Take Advantage Of Balance Transfers
Balance transfer credit cards can be a huge benefit to your company. If you’re carrying a balance on another card, it might be beneficial to search for a balance transfer offer from another credit card provider. Upon each credit card balance transfer you’ll have an extended time to pay it off without having to also pay the interest fees.
However, if you don’t pay the balance by the time the balance transfer offer expires, you could be facing even higher interest rates. This can lead you down the path of the debt cycle, which is almost impossible to climb out of once you’re in it.
These are some of the wise ways to use your business credit card while keeping your company finances in check and avoiding higher interest rates.
Pay Attention To All Fees
When you’re searching for the right business credit card, make sure to check each card for the fees that will be charged. All credit cards, even “free” cards, will include fees. You may have to pay a membership fee, an annual fee, etc. In addition, credit cards charge interest, late fees and more.
Make sure to read through all the terms and conditions before you apply for any kind of business credit card. Find out what fees are included, as well as service charges and interest rates. You need to have a thorough understanding of the credit before applying. In fact, if you have questions, now’s the time to contact the card provider’s customer service and ask them about any issues you may not understand.
Have A Plan
Once you have a company credit card, have a plan in place on how the balance will be managed before making any purchases. Why? Because you need to figure out if you’ll be able to pay off the balance each month, or if you’ll need to pay the balance off over a specific period to avoid interest fees. In this case, a good and responsible choice is to choose a pre-paid business card.
Not having a plan can be costly. For instance, carrying a balance will cost the company more interest over the long term. And interest can go up if payments aren’t made on time. A plan will help you better manage the balance and the time needed to pay it off in order to avoid these problems.
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