Using credit cards as a limited-scale financing technique can be successful, but use these tips to make sure you don’t go into debt — or bankruptcy.
- Don’t mingle business with personal expenses. Mixing your business and personal transactions on the same credit card can create potential tax and money-management problems down the road. By keeping all your business charges on your business credit card, you can more easily track your corporate expenditures and reduce headaches come tax time.
- Do use your card wisely. One benefit of a credit card is the typical 30-day, no-interest grace period. You can use that time to improve your cash flow, but it’s essential that you pay off the balance before that grace period ends, or else that “loan” will quickly turn into a high-interest debt.
- Don’t go card-hopping. Signing up for multiple credit cards to take advantage of deals can have a negative impact on your credit score, making it harder for you to get business loans and lines of credit down the road.
- Do look at your credit score. Before you apply for any credit card, make sure beforehand that you’ll even qualify for a good rate. A good score is above 620. You can get a free credit report every year from each of the three reporting agencies: Experian, Equifax, and Transunion, although you’ll have to pay a small fee to get your actual score number.
- Don’t do cash advances. These can incur multiple fees and costs, and usually do not qualify for the interest-free grace period. Opt for your business debit card when you need immediate funds.
- Do pay on time. Late fees and high interest rates will quickly erase the benefits of having a small-business credit card. Be a responsible business owner and pay off your balance every month.