Using Your Business Credit Card Wisely

A business credit card can be used to bankroll your small business needs in the short run, but it must be used wisely. Imprudent use of your business credit card can have long-term effects on your small business.

Lots of business people use business credit cards to flatten the creases in their cash flow. There is nothing improper in using a business credit card to help you through the rough spots. Remember, however, that your business credit card is not a single source financing tool.

•Do not overspend. If you have to carry a balance forward on your business credit card, high interest rates and penalties will be incurred. Always pay on time and strive to avoid carrying a balance forward, as it is a temptation to minimum payment.

•Do not get caught in the minimum payment cycle. The minimum payment will guarantee one thing; that you will be paying the debt, fees, and high interest rates on your business credit card practically forever. It's a cycle resulting from overspending. You receive a statement you cannot afford to pay and decide to make a minimum payment. The minimum payment attaches high interest rates and additional fees that drive up subsequent bills too high for you to pay the balance in full, and you make another minimum payment. So it goes, month after month. This is the minimum payment cycle and it can ruin your business credit report and, consequentially, your business itself.

•Make the decision about your card based upon your business needs and not upon some rewards or bonus program. Rewards and bonus programs are often unrealistic and you want to avoid overspending as you chase points impractical to your situation.

•Remember that your business credit score can affect your personal credit score even though the business credit card is not directly linked to your personal finances. A bad credit score for your business will pull down your personal credit score and cause havoc with your personal finances.

Financing can be difficult for a small business and a business credit card offers you the opportunity to some guerrilla financing for your business. You need to be practical and reserved with the use of this card. It is a tough line to walk; deciding when to use the card to aid cash flow for your business and determining, at the same time, when to cut back on business credit card expenditures.

Always endeavor to pay your monthly balance in full and within the grace period. Making certain that you do not spend more on your credit card than you can fully pay when it cones due is one way to maintain that difficult spending balance.