|
 |
|
Business Credit Cards: Best Practices for New Entrepreneurs |
 |
Business credit cards
create a powerful cash-management tool for new entrepreneurs. They also
lay a trap if the new business owner chooses the wrong card, uses the
card unwisely or does not carefully monitor spending.
Choose the Card Wisely
A new entrepreneur filing for an employer identification number or
establishing a business checking account will soon find a mailbox full
of offers for business credit cards. These cards offer good benefits,
but a wise choice of cards can save money and time.
A new entrepreneur should look first at the annual rate of interest the
business credit card issuer charges beyond any introductory rate.
Additionally, be certain to understand what happens to that rate after
a late payment.
Even good interest rates can be offset by high monthly fees. Be aware
of fees charged monthly that do not kick in until after an initial
grace period. These fees will simply show up as a charge on the
business credit card.
Carefully compare all added benefits of the card. A few benefits can
include the standard travel reward points or cash back. However, many
business credit cards also offer sophisticated spending tracking tools
and added cards for employees.
Choose the business credit cards that offer the best array of benefits.
Be very careful to understand all fees, penalties, transfer fees and
prepayment rules.
Spend According to Plan
Business credit cards compare to a business line of credit or any other
borrowing the new entrepreneur undertakes. All such borrowing-based
spending should be done according to a business plan.
A business plan develops specific tactics based on long-term goals and
strategies. Be certain that the business plan tactics include specifics
for uses of the business credit card.
Don't Overuse
The U.S. Small Business Administration estimates that half of new
businesses are no longer in operation after the first five years. The
primary cause of business failure is underestimating capital
requirements.
For the new entrepreneur, a business credit card offers access to funds
when times are tight, and times are often tight. Resist the temptation
to overuse the card to meet cash shortfalls. Even the most competitive
business credit cards carry a high rate of interest after introductory
rate periods. The interest expense can balloon quickly.
Consider carefully keeping a reasonably low borrowing limit on the
card, even if the business qualifies for more.
Use Every Feature
Business credit cards offer benefits in addition to cash flow help. Use
every tool available to help your business. Maximize travel reward
points for business travel cost reduction or employee incentives. Take
advantage of all cash management tools offered. Prepay and save
interest if prepayments are allowed.
Monitor Employee Spending
Every business credit card allows the entrepreneur to monitor spending
almost as it occurs. Be certain to set employee spending limits,
monitor employee use of the cards and stop trouble before it arises.
Use a similar discipline for monthly monitoring of all uses of business
credit cards. The card issuer will have suggestions in this area as
well.
|
Did you find this article helpful? |
|
|
Credit Card Articles > Business Credit Cards > Business Credit Cards: Best Practices for New Entrepreneurs
|
|
|
 |
|
