Credit cards, once seen as something new and unique in the financial markets, have become as common as grass on a baseball field. However, if you are a business owner then you have the unique opportunity to get a business credit card. This is the big leagues of spending, and even if you've been good with your personal credit cards up until this point, it's important that you tread carefully regarding business credit cards. There's great potential for growth and venture capital, but at the same time there's also the potential for problems which can lead to business debt as well.
As with any sort of investment that you're making involving your business, you need to carefully read the terms and rules of the available business credit cards on the market. You need to look not just at the amount of money you can borrow, at the interest rate the car charges you or at the grave period it offers, but you also need to line the different cards up side by side to compare them to each other. After all, just because one card looks or sounds good doesn't mean that it will be when put up against the competition.
The pros of a business credit card are relatively the same as a personal credit card, just expanded. With a business credit card you can:
- Build a credit history for your business. This can help getting loans and investments on down the line.
- Cover immediate, day-to-day expenses. Businesses have to spend money to make money, and credit lets you cover yourself while waiting for checks to cash.
- Organization and Itemization. Credit cards are a lot neater than just using cash, and when you get your statement at the end of the month you have a carefully arranged, itemized list of your purchases.
These are some of the biggest benefits of having a business credit card. This is particularly true for small businesses, who might need a little bit of extra help to get through from one day to the next.
As with everything else there's a downside to having a business credit card too. In fact there are several potential problems with these cards, but they can be overcome with shrewd business practices. For instance, you have to take into consideration:
- Interest rates. When you use your credit card you're not just paying a certain amount of money, but you're paying more money the longer the balance is outstanding.
- Fees. Most cards come with fees, and you need to be aware of what they are. Otherwise you can wildly underestimate just how much you've spent.
- Over-spending. This is a major risk for those that aren't tight with their business credit. If you buy too much and you don't make a return on that investment, you're going to have problems.
None of these are deal breakers for a business credit card, but business owners need to be aware of risks.
Dave Thompson writes for Businesscreditcards.com and is open to writing on a freelance basis about anything related to his industry.