It’s safe to see that a majority of consumers carry some sort of credit card, and it would be absurd to think that any entrepreneur wouldn’t have a credit card. More than 80 percent of small-business owners use credit cards, suggests Federal Reserve. The credit card is the best source of payment when we just don’t have that large amount of cash on our hands.
Business owners and entrepreneurs can use credit cards to turn those otherwise fiscally impossible purchases into easily obtainable items and services until withholding payments until the end of their credit card billing period. For those able to manage their credit and financial responsibilities it is a powerful tool, but are you using the right tool?
As an everyday consumer, you should be using personal credit cards in order to purchase goods otherwise not buyable. Purchase your groceries, clothing, and other goods needed to live your life comfortably with personal credit cards in order to build up personal credit. A good personal credit score on your annual credit report can help you get better credit account terms, personal loans from online lenders like Lendgreen, and even nail you a better job.
For the entrepreneurs reading this, you’ve probably put several things necessary to keep your business above rising waters on a credit card of some sort. What kind of credit card was it, though? Did you just put your office furniture expenses on the same personal credit card that bought your groceries last night? For those practicing this technique, you may want to look into applying for a credit card offered specifically for businesses, business owners, and those employed in your business. You must know the core difference between a personal credit card and a business credit card.
Keeping Work Separate from your Personal Life
One of the main advantages of having two separate credit cards, one for business use and another for personal expenses, is to keep the types of purchases you make separate. Obviously, purchases made to benefit your business will go on your business credit card, and personal purchases will be left ordered on your personal credit card. This helps avoid confusion when it comes time to file your taxes.
You can spot tax deductable items more clearly on separated credit card invoices, better find where your bills need to be paid, and know which expenses came from where and what reason they were purchases.
Two Credit Scores are better than ONE!
If you are the business owner and are using both business and personal credit accounts to separate your purchases, you actually have the chance to build two separate credit scores. While business credit cards are initially linked to your personal credit reports under your name, if you have incorporated your business you can eventually break that line of credit off of you and put it under your business’s name, instead.
Why would you want two lines of credit scores – a personal credit score and a business credit score? Well, credit scores can help us later on in life. With our personal financing in mind, if we have managed to keep ourselves relatively dry from the credit debt pond we will have an excellent personal credit score. This buys us faster cars, bigger houses, allows better credit accounts to be opened, and makes life a whole lot easier. Much of this can be translated to the business side of credit scores.
A business credit score isn’t quite the same in the way it is taken track of (0 – 100 score instead of 300 – 850), yet it operates similarly. A business credit score takes purchases and the history of payments on those business credit accounts in mind when calculating its credit score. Those with business lines of excellent credit will find it much easier to borrow larger sums of money for expanding and developing their business further.
If you have a business credit card, but haven’t registered your business name with business bureaus and credit agencies, those responsible for calculating your business credit scores will not even get them. Instead, it will be tied to your personal credit score which may hurt your score as business credit cards don’t rake in the benefits for personal use that a personal credit card does.
Expand the Use of your Business Credit Card
A personal credit card is meant for you and you only. Using business credit cards opens opportunities for you to help out your employee’s work needs when you can’t go out and purchase the necessary equipment they need to do their job. Many business credit card lenders allow for separate business employee credit cards to be sent out under you and your business’s name.
It adds convenience for several different types of businesses where stock may need to be bought quickly when you, Mr./Ms. Boss, aren’t always around. Do be sure you keep track of employee’s credit cards expenses. Your employees might forget that that is a business credit card you’ve given them, not a free personal credit account paid for by you.
Reap the Benefits… Lower Business Costs!
Many personal credit cards give amazing benefits. Lowered gas prices, airline miles, cash back, and other generous awards are given to those that know how to use their personal credit cards to better benefit them. Shopping around for business credit cards can help you and your business reap the same benefits.
Many business credit cards offer cash back if the credit account is fully paid by the next billing period. With high business expenses, this could be several thousands of dollars a month. Other cards may offer extended paying periods when slow times arrive. Many business credit cards also allow business owners to receive exclusive discounts at places where business is almost necessary to come in (postal services, copier services, technology and business computer outlets, etc.).
Both types of credit cards should be treated the same way. Don’t overextend how much you can afford on the card, shop around for the best rates before applying, and always pay as much as you can on your credit balance if you can’t pay all of it. The importance of credit is not only a factor in your personal life, but it can be what decides the life or death of any small business you wish to further develop!