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Spend Wisely: How to Get the Most Out of Your Business Credit Cards

Jennifer Dublino
Jennifer Dublino
business.com Contributing Writer
Updated Feb 14, 2022

Here are six ways small business owners can get more from credit cards.

Small and midsize business (SMB) owners may need quick access to cash, but loans don’t always cover the gaps. As lenders tighten borrower requirements, many companies are turning to credit cards to fund their operations.

How to use business credit cards wisely

You can use your business credit card as a tool to help you achieve your short-term goals. However, if used incorrectly, you will find yourself with a pile of mounting debt. Here are some smart ways to use your business credit card:

  • Set individual spending limits for employees.
  • Use it to build your business credit.
  • Deduct interest and annual fees from your business taxes.
  • Use your card statements as a reference for business deductions for expenses, such as travel.
  • Judiciously use it to keep your cash flow going when waiting for payment.
  • Finance major purchases within the introductory period.

TipTip: Look at the benefits of your business credit card and ensure that you can take advantage of the perks.

Editor’s note: Looking for the right financing solution for your business? Fill out the below questionnaire to have our vendor partners contact you about your needs.

Pros and cons of business credit cards

Pros of business credit cardsCons of business credit cards
Easy to separate business expenses from personal expensesHigher interest rates than personal cards
Accessible faster than a business loanHigh risk of employee abuse
Organized cash flowPersonal credit impacted
Unique perks not offered on personal cardsPotential for overspending

FYIFYI: If you have employees, it is important to create a business credit card expense policy to ensure cards are being used wisely.

Finding the right balance

Credit cards offer plenty of advantages, but misusing these beneficial tools can quickly turn them into burdens.

Just because your company makes regular payments on its credit cards does not mean you are using them wisely. Interest rates tend to be extremely high compared to other funding sources, which means you could spend more than your company earns. If you turn to high-interest credit cards during hard times you could make a bad situation worse.

However, credit cards provide significant advantages for responsible borrowers. Cash back, interest-free periods and 60-day floats can help a growing company take advantage of short windows of opportunity. To get the most from perks without suffering the drawbacks, take the time to learn the ins and outs of business card financing.

Consider these six tips when leveraging credit cards to finance your SMB:

1. Don’t pay interest.

Credit cards can help your business by quickly raising capital. Banks make little money off exchange fees, but they make much more when their customers get into a cycle of debt. You should only use credit cards if you can do so without carrying a balance from month to month.

This should be common personal finance wisdom, but it’s easy to get so involved with growing your business that you fail to recognize bad habits until it’s too late. Credit card interest rates fluctuate based on the market, unlike traditional loans, which means you can easily negate future gains by paying higher fees – even if you think you’re beating the system. Maintain constant vigilance to avoid turning a helpful tool into an added expense.

2. Optimize benefits.

Many business cards include benefits that traditional financing sources don’t offer. These perks can include discounts on travel and lodging, or preferred pricing for services. Explore the market to see which cards offer the most relevant benefits for your company.

For instance, if you travel infrequently – but spend a lot on shipping – do not obtain a business credit card that offers frequent flyer miles. Different cards offer perks for shipping, advertising and travel. As competition for business credit heats up, a few card companies have begun to allow businesses to design their own bonus categories. To avoid spending too much time optimizing card spending, find one or two cards that cover your specific needs.

3. Watch for introductory offers.

Credit cards attract new users with all sorts of promises. Some advertise zero interest, while others entice applicants by offering thousands of points for new signups. All offers come with strings attached, so read the fine print carefully.

Using racked miles or points usually require you to meet a spending threshold within a certain time frame. Some offers require only a small amount of spending – like $3,000 – while others demand $20,000 or more.

A promotion can also end abruptly, leaving you blindsided. If your business floats thousands of dollars on a card, you could face a substantial bill when the introductory offer ends, costing you even more than the initial offer.

4. Track your financial statements.

You’ll need to watch your financial statements closely when utilizing business credit cards. This gives you an idea how your company is doing and helps you monitor your cash flow. Review your books each week, and note when your revenue is highest. Choose a date when you will have increased cash flow to make your credit card payments.

5. Avoid commingling.

It can be tempting to make personal purchases on your business card or business purchases on your personal card. This makes it difficult to keep track of your expenses and profits come tax season. It can also negatively affect your credit score if you miss a payment.

6. Hop cautiously – or not at all.

Credit card hopping is when you go from one card to another to get perks or rewards – like cash back or zero-interest periods. Cards often have introductory offers, and opening a new card account can allow you to take advantage of these.

However, you will need to thoroughly research the card before you choose it. You should also take careful note of annual and transfer fees. Consider whether it’s really worth making the change. If you are switching to get rewards points you won’t use, or a lower introductory interest rate even though you pay off your cards before they accrue interest, there’s little benefit.

Opening new lines of credit will also lower your credit score, so it’s not wise to get new cards often. If you are planning to apply for a large loan soon, it’s best to avoid credit card hopping so your score will be as high as possible.

Bottom LineBottom line: To get the most out of business credit cards, optimize perks – like discount programs, rewards, and low or interest-free loans – while minimizing fees.

How to get the most out of your business credit card

Even though company credit cards can be risky, here are some ways to use them to your advantage:

  • Utilize instant rewards. Some rewards cards – like cash-back cards – automatically give you what they promise. Other rewards cards – like hotel and airline rewards cards – have a threshold requirement before you can take advantage of them. To make matters worse, points can expire. Some cards also have partnerships with certain businesses in which they extend discounts to cardholders. If you need to buy something from those merchants, make the purchase before the offer expires.

  • Use purchase protection benefits. If your card has purchase protection, and you use it to buy a computer or other hardware that could break down, use this benefit to get it replaced.

  • Get an interest-free loan. Need to buy office equipment or another expensive item? Look for a card with a 0% introductory APR. Pay it off within the grace periods and you have financed your new purchase at no added cost.

  • Simplify expense reports. By issuing cards to your employees for their reimbursable expenses, you can cut down on time filling out and checking expense reports, and earn reward points in the process.

  • Review statements. Most business cards produce a statement at the end of the year detailing how much you spent on different categories. Review this statement, as it is a good snapshot of your business expenses.

  • Link your account. Link your credit card account to your accounting software, which will save your finance personnel time. Check out our accounting software reviews to find programs that will automatically account for your card purchases.

  • Get the lowest price. If your card has price protection, save your receipts and get the difference in price if it drops after you buy a product.

  • Achieve elite status. Some co-branded cards automatically qualify you for elite status, while others accelerate the process so you can get upgrades and discounts sooner.

Adam Morehouse contributed to the writing and research in this article.

Image Credit:

Lightfield Studios / Shutterstock

Jennifer Dublino
Jennifer Dublino
business.com Contributing Writer
Jennifer Dublino is a prolific researcher, writer, and editor, specializing in topical, engaging, and informative content. She has written numerous e-books, slideshows, websites, landing pages, sales pages, email campaigns, blog posts, press releases and thought leadership articles. Topics include consumer financial services, home buying and finance, general business topics, health and wellness, neuroscience and neuromarketing, and B2B industrial products.