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A guide to business credit cards

creditcards23282319.jpgAlmost 65 percent of businesses have at least one active business credit card. Business credit cards provide business owners with the ability to easily manage their employee's spending, monthly expenses, and rewards. Business credit cards have lower interest rates, higher limits, and incentives that persuade business owners to take advantage of them. Even with all the benefits, business credit cards can be detrimental to a business. Here are some things you need to consider before you sign up for a business credit card:

  • Will the card be used solely for business purposes?
  • How many employees will use the account?
  • How big of a credit limit do you need to qualify for the lowest possible interest rates?
  • Are there monthly fees you will need to pay to keep the card?

With so many creditors out there, it can be difficult to find the right business credit card for your company. To find one that fits your company needs, look for the creditors that offer lower interest rates and no finance charges. This may mean you will miss out of some of the perks of other credit cards, but the perks are for not if you have to pay extra money in finance charges.

Business credit cards are a great way to manage your cash flow. If you go through cash flow shortages, you can turn to the credit cards for funding. Most business credit cards are interest free for the first year and then maintain a low interest rate after the initial period. Credit cards provide business owners with a great opportunity to purchase the equipment they need and pay off the money they borrow before interest is charged. This has tremendous benefits over a short-term business loan that charges interest and will penalize you for paying off the loan early.

As stated above, business credit cards provide you with a great opportunity to manage employee expenses. Each time the employee makes a purchase, you have a record of it and you don't need to wait for a receipt nor do you need to worry about them keeping extra cash. Be careful about handing a business credit card to an employee, many of them will use it for personal purchases like gas and entertainment expenses. Make sure you set clear rules about the business credit card and review the statement each month to check each purchase and confirm they are valid.

Business credit cards normally come with some type of incentive like a reward program. The rewards programs are a great way to build up points to get a free plane ticket or hotel rewards. For businesses that need to travel often, rewards cards can certainly reduce some of the additional expenses you have. Some credit cards even offer rewards for small purchases like office supplies.

Always shop around for credit cards with low interest rates. You should expect to pay around 3 percent to 18 percent annually. However, most creditors will offer you lower interest rates if you increase your credit limit. Businesses can quickly lose control of their credit card bills when they are carrying a high balance and a high interest rate. Interest rates will be based off your business credit score and past creditworthiness. This is why it is important to always pay your bills on time and never carry more than 20-30 percent of the total balance on your card. Late fees and over-the-limit fees can easily cost $40 per month and this can really hurt your credit score.

Before you use the big credit card companies, contact some local lenders and discuss their credit card terms. Sometimes the local businesses will offer better deals from the larger creditors.

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