During my busy day with errands, I pulled out my credit card several times to make purchases. Only later, when I went to pay my credit card bill, did I realize that I had used my business credit card to make some personal purchases.
This was an honest mistake. I have a business credit card and a personal credit card from the same issuer, and they look pretty much the same except one has my business name added to it.
To avoid confusion again, I bought a cheap sleeve for my business card and wrote “biz” in big letters on the front.
Credit cards are a popular funding option. Whether you’re just starting a business, growing an existing business, or a freelancer, you rely on credit card financing for the majority of your purchases.
Some credit card mistakes like mine are pretty harmless. I fixed this mistake and it didn’t do any serious damage. Others can be quite expensive.
Here are five business credit card mistakes to avoid.
1. Combining business and personal expenses
A business credit card makes it easy to track your business purchases. But if you also use your card for personal purchases, you might face headaches during tax season, especially if you don’t keep track of your receipts carefully.
Additionally, if you’re not using your card exclusively for business purchases, you may not be able to deduct interest or annual fees. (Please check with your tax accountant.)
If your business is incorporated, mixing business and personal purchases can make it difficult to maintain legal protections for your business entity.
Resolution: your Business credit card for business purchases A personal credit card for personal purchases.
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2. Financing Wrong Purchases
Credit cards are more than just a convenient and secure payment method. We may also offer credit facilities that allow us to fund purchases over the long term. Using a credit card in this way is convenient and eliminates the need for a new credit application or review by the lender.
Some card issuers offer 0{ea2cba5bdf6fe62bbe85e24807814144a71e77d3ae7311fbc27a008558d1372c} referral APR for 12-18 months on business credit card purchases and/or cash advances, making credit cards an inexpensive way to maintain cash flow for a business. may provide a method.
However, credit cards are best for short-term funding. Otherwise, your business may find yourself in high debt when your low adoption rate expires. can make this problem worse.
Resolution: If you need large purchases or long-term financing, consider other types of small business financing such as equipment financing, term loans, or SBA loans.
3. Missing Rewards
Business credit card rewards add up quickly. But if you haven’t been thinking about rewards lately, you may not be getting the right rewards.
A perfect example at the moment is travel rewards. Let’s say you’ve paid a hefty annual fee for an airline premium mileage card, but you’ve canceled an in-person business trip for the foreseeable future. Or, gas prices have gone up, so you might save money by purchasing a gas card with bonus cashback.
Finally, if you’re looking to switch to a new card, many card issuers offer extra points if you reach a certain spending limit within the first few months of owning the card. Consider offering welcome offers that offer , miles, or cash back. Welcome offers (also known as “limited time offers”) make taking the time to choose and apply for a new card really rewarding.
Resolution: Review your credit card rewards program annually to make sure you’re taking advantage of the rewards your card offers and consider if it’s time for a change.
4. Overdue
Always pay your credit card bills on time. Doing so protects your credit score and helps you avoid late fees.
But for business credit cards, timely payments are even more important. This is because you are likely to run out of headroom similar to what you would have with a personal credit card.
Business credit cards are not subject to credit card laws, unlike personal credit cards. If you miss even one hour of payment, the issuer could (and will) probably raise the interest rate to a ‘default’ or ‘penalty’ rate. The new rate can be applied to existing balances as well as new purchases.
Resolution: Set up automatic payments above the minimum amount. As long as the minimum amount is paid on time, you will not suffer the consequences of failing to pay.
5. Fall victim to fraud
Credit cards, including business credit cards, have better fraud protection than any payment method. You can dispute fraudulent purchases and purchases where goods or services were not provided as agreed. These protections under the Truth In Lending Act apply to both consumer credit cards and business credit cards.
But you can still get stuck with fraudulent purchases. How? Below he gives two examples.
*You are not paying attention. If you pay your credit card bill without reviewing each individual charge, you may end up paying for purchases you didn’t make or authorize.
* Giving cards to employees or contractors who make unauthorized purchases. If you authorize them to use your card, you are responsible for any charges they make.
Resolution: Check each credit card statement carefully. Set up spending controls for cards you pass to others. Use virtual card numbers for recurring transactions when available. You can also set up alerts to instantly notify you of transactions outside of your typical spending patterns.
A business credit card is a smart way for your business to pay for purchases and manage the ups and downs of cash flow. Use them judiciously to maximize perks and reduce risk to gain the upper hand.
