Tips for Small Business Credit Card Use

Small businesses can turn great profits for credit card companies.  Small businesses need credit cards to survive the roller coaster of uncertainty that comes from fluctuations in cash flow from month to month.  For the small business just starting out, a credit card is often times the only way they can purchase the items needed to meet their daily purchase and expense requirements.

The changing economy has made it difficult to obtain loans because of the risk that new small businesses pose to creditors. According to a survey done in 2008 by the National Small Business Association, the percentage of small business owners that have had difficulty securing a loan is over 50%. Banks are becoming far more conservative with their lending practices.  The new credit card regulations set to roll out in 2010 will make borrowing exceedingly harder and far more costly for small businesses looking to secure the credit that they’ll need to run their businesses.  Business credit cards are the most commonly used transaction method for small business expenditures.  But those small businesses that rely on credit for their survival can avoid many of the typical problems associated with card use by small business owners by following a few simple steps.  Here are a few of those simple tips for small business credit card use that can help you avoid those problems:

• Seek out the card; don’t let the card find you. Actively look for a credit card that will suit your needs while providing benefits and low charges for use.   Beware of the introductory offer or the application that are aggressively advertising credit cards. These offers may have the no interest written in big bold letters and the date that the interest will start written in small print.  Read the entire offer before you apply so  you don’t end up with a huge amount of accumulated fees a year later because you didn’t read the fine print.

• Take advantage of the offers and rewards that will best suit you needs. If your business requires regular traveling look for a card that offers airline miles.  If you will benefit more from cash back programs look for a card that offers these incentives. Since you have to spend you may as well earn incentives that will be beneficial to you or your business.  Many credit cards that tailor their advertising to small businesses may offer discounts on office supplies, letterhead or business cards which may also save you money in the long run.

• Talk with someone in person before committing to a credit card. Once you find the card that you think suits your business needs pick up the phone and call the customer service number.  Ask about the annual percentage rates finance charges and the incentive bonus programs that they offer.  Write down the name of the person that you spoke with.  This will give you the information that you need if this should change down the road.

• Pay off your balance on time. It is true that small business cards tend to have lower fees those other cards but there are still fees that can be avoided.  Paying off your balance if possible is one way to avoid extra charges.  If you can’t pay the entire balance pay more than the minimum and do it on time.  Late fees are not only bad for your credit report they cost you money.  Credit cards view your credit history as an indicator of your level of risk.  Those with lower risk get better incentives, rates and credit limits.

• Spend within your means. Having a number of credit cards can be dangerous because it can be costly.  Make a commitment to spend within your means.  It is tempting to apply for another card when you need. More cards equal more temptation to thing that you can spend beyond your means. More spending leads to potential fees. Limit your cards to those that you need and can afford.

Credit cards unlike personal or small business loans are easier to obtain and more readily available. Everywhere you look there are advertisements for credit card offers promising applicants many fringe benefits if they apply and even more if they are accepted.   These benefits may come with strings attached if the business owner doesn’t comparison shop. Comparing credit cards is the first step in choosing the right one card for your business.

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