barista accepting business credit card

If you’re running a small business, a credit card can be a convenient tool for stocking up on inventory, booking travel, and covering day-to-day expenses. Used prudently, a credit card can help you optimize cashflow, streamline bookkeeping, and build a solid credit history. But if you aren’t careful, it can become a liability. Here are some tips for using a credit card to your firm’s full advantage.

Business Credit Card Dos

1. Do pay your bills in full and on time. Just like your personal credit score, your business credit score is based primarily on your payment history. Consider setting up automated monthly payments to avoid late fees and adverse credit report items.

2. Do track your expenses. With any credit card, it’s easy to swipe it and forget it – and if you have multiple employees with card access, spending can quickly get out of control. Commit to a thorough review of your monthly statement every month.

3. Do set cardholder controls. Every business should have clear internal policies about card usage – but sometimes that’s not enough. Investigate digital tools that enable you to set transaction limits, category limits, and user restrictions.

4. Do build your own credit file. Business creditors typically don’t report account activities to the credit bureaus. So, it’s a good idea to maintain your own credit records that you can show to future lenders.

5. Do take the deductions you’ve earned. In many cases, credit card interest and fees can be deducted from your business taxes. To do so, you must be able to demonstrate that all the underlying charges were business-related. Consult your tax accountant.

6. Do enjoy easier accounting. Automatically categorized monthly statements can help you to budget your business expenses. Plus, many digital tools allow you to link your credit card and bank accounts so you can continuously monitor and manage spending.

Business Credit Card Don'ts

1. Don’t neglect your emergency fund. A credit card can be a convenient way to pay for recurring costs, but it shouldn’t be your only lifeline. Prioritize building up a sufficient cash reserve to handle unplanned expenses and slow times.

2. Don’t max out your limit. You may have heard the rule of thumb that to avoid dings on your personal credit score you should aim to keep your revolving credit utilization ratio under 30%. The same goes for your business.

3. Don’t mix personal and business expenses. Keeping your finances separated is essential for sound bookkeeping at tax time and all year round. It also demonstrates to potential lenders that your business is a serious enterprise.

4. Don’t rely on cash advances. It can be all too tempting to get cash out of your credit card at ATMs, but it’s seldom a smart move. Even if your credit card doesn’t have a higher APR for cash advances, there can be substantial per-transaction fees.

5. Don’t jeopardize your personal credit. Small business cardholders may have “joint and several liability,” meaning that the card is also tied to their personal credit history and assets. Make sure that bad workplace decisions don’t follow you home.

6. Don’t ignore other borrowing solutions. A credit card isn’t the only way to finance essential business expenses. An experienced commercial lender can help you explore other options, like self-collateralizing equipment loans, SBA loans, and lines of credit

You’re In Charge

Here at Citizens Bank, we’ve been helping East Tennessee entrepreneurs to boost their purchasing power and realize their growth goals for over 85 years. With a competitive APR and no annual fee, our Visa® Business credit card might be the perfect solution for you. Learn more and get started today.