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The Importance of Credit Cards for Small Businesses

By Susan M. Keenan ©2007

Operating a successful small business involves quite a few different facets including acquiring reliable financing.  This is essential not only to launching a small business, but also, to circumventing potential problems.  A small business credit card acquisition can be crucial to simplifying your accounting policy, tax filing paperwork, the success of the business, and more.

All business purchases should be made with business funds, whether the business owner uses a credit card, checking account, or cash.  Personal funds should not be involved and therefore, using a personal credit card is simply not a viable option.  Sure, it’s easy, but it does muddy up the waters.

Payroll expenses, business inventory acquisitions, petty cash expenses, and operating expenses should all be paid for with business funds.  A credit card is often the way to go for small businesses.  Not only does it simplify the purchasing process, but also, it simplifies the record keeping due to monthly statement sent by the credit card company. 

If all of your business expenses are placed on one card, then the entire bill is a business expense.  No more going through tons of receipts to separate your personal from your business expenses.  Plus, you will be able to create a positive credit history through the proper use and payment of your business credit card account.

Small business credit cards are almost identical to personal credit cards.  In fact, the main difference is the simple use of the name of your business on the credit card instead of a personal name.  Typically, the credit limit is slightly higher than that granted to many first-time personal credit card accounts.  However, the payments are monthly, interest charges are usually assessed on unpaid balances, and minimum payments are expected.

To get the most out of your small business credit card, follow these basic steps:

  • Understand the terminology associated with credit cards by doing a little research. 
  • Discover which companies offer credit cards for small businesses.
  • Compare the specific terms attached to each credit card including interest rate, annual fee, late fees, grace period, default clause, and universal default clause if applicable.
  • Select a credit card with terms that suit the needs of your small business.
  • Determine which expenses are strictly business expenses and use the credit card only for those expenses.
  • Set up only one new business credit card for easier bookkeeping. 
  • Set up an online account.  This provides easy access to account information, easier payments for monthly credit card bills, and savings on postage.
  • If you are having difficulty acquiring a credit card for your small business, try to get one through the same company as your personal credit card or the bank that you use.

Don’t assume that the terms of a small business credit card are identical to those offered for personal credit cards.  Due to the nature of the card, the terms are typically more stringent.  For example, more credit card companies wave annual fees for personal accounts than for business accounts.

Additionally, it’s important to separate your business expenses from the very inception of the business.  Acquire your small business credit card as soon as you begin to coordinate the various facets of your new venture.  Personal benefits include alleviating strain on your personal finances, accessing twenty-four hour spending potential, and simplified vendor relationships.  The sooner you acquire your small business credit card, the sooner you can be on your way to success.