A look at whether or not you should use credit cards for your business

Do you need to use your credit cards for your business or not?There are many opinions on the matter as well as various other alternatives for borrowing money.Of course, the use of credit cards is not necessarily bad. It just depends on how you use them.

As you possibly know, there are times in business when your cash is low and you have to determine the best method for getting money rapidly. Should you use credit cards, get a loan from a bank or use your savings? These are all possible and suitable choices, depending on the business circumstances.

Using credit cards can be favorable when you are responsible and pay off the balance and not let the interest at a very high rate start accumulating. Credit cards that offer incentives to be redeemed for air fares, hotel rooms, restaurants or car rentals are great to use, especially for business, because they can help reduce your business expenses. But remember, the key is to only use the credit cards with great responsibility and pay off the balance to avoid high interest accruals. Credit cards interest rates can be ridiculously high, and the finance charges can rapidly get out of control.The best thing to do is to use credit cards for monthly expenses to accrue enough points to redeem your incentives for air fare tickets, hotel rooms or car rentals when you need to go on a business trip. Of course, you need to pay the credit cards balance in full at the end of each billing cycle.

Carryover balances can cause you to be in serious financial trouble. All your business debts should be carefully planned. Leave impulse credit card buying to consumers who are out of control financially.

If you have a balance on your business credit card with high interest, you can actually look for credit card companies that offer opportunities to transfer your present balance to a lower interest rate credit card. This will help you to reduce your monthly interest rate payments and have most of your money go to paying off the principal. So be on the lookout for such credit card companies.

Borrowing funds from your local bank is a popular alternative to credit cards when you first start out or expand your business. Lenders tend to hesitate from loaning you the money unless you can prove to them that your business is capable of making profits and that you will be able to pay back every penny borrowed. You can also look into the option of opening a business line of credit account to borrow the amount of money you need for a short term period. Lines of credit are not intended for long term loans but are designed to only secure incoming and outgoing cash flows. Lines of credit allow you to get the cash when you need and to pay it back frequently. Ideally, you should only need to borrow the money to pay your bills while waiting for your customer's payments to arrive shortly. You can also get a credit card which borrows against your business line of credit. Lines of credit offer higher interest rates than your traditional long term loans but give you flexibility to always have cash on hand for future business needs or emergencies. You decide!

If you choose to use cash for your expenses, it is probably the least costly approach. But make sure you don't use up your cash fund entirely. If you decide to use your business savings, you can report this as a business loan and the interest can be tax deductible. As your business increases its profits, remember to pay off the amounts that you borrowed and deposit some of it into your savings so you can always have cash in case of sudden business needs.

The question of whether you should use the credit cards or not for your business depends entirely on you. It's not a completely bad thing to borrow from the credit cards as long as you show responsibility to always pay the monthly balance off. Whether you borrow the money from a credit card company, the bank or your savings, there is always a cost associated with it. This is true with any loan you create. Credit cards can be attractive especially if you get great incentives for using them.