Business Credit Cards: How to Make Them Work for You & Not Against You

Feb 18, 2020

If you’re not using a credit card in your business, you might be leaving money on the table.

Some people hesitate to use credit cards out of fear of debt or high interest limits, and believe me, I get that.

In this blog I’ll discuss how  business credit card can benefit you, how to avoid getting sucked in to debt, and things to consider when getting a business credit card.

We want to ensure you’re business credit card will work for you versus against you. 

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I’m super debt averse but use my credit card whenever I can

Something you should know is I’m super debt averse. I’ve literally never had debt.

My parents got me my own credit card as a teenager, maybe 15 or 16, when I was already working. They told me to never use it unless I had the money and I was the biggest rule follower around so I was VERY strict with this.

To this date, nearly 18 years later, I’ve never carried a balance on a credit card unless it was 0% interest.

I started really small and only used it to charge gas. Then I’d take the cash I had from working and physically go to the bank and pay it off periodically throughout the month. I always paid before it was due.

In college I took a personal finance class that said paying cards before they’re due is basically giving the bank a 0% loan so then I switched to paying in full on the due date every month.

Slowly, I started adding on other charges. A lunch here and there, until I was better managing carrying a balance and still having the cash to pay for it at the end of the month.

Now I use a credit card for both business and personal expenses (on separate cards of course) whenever possible because earning points and building credit is just plain smart.

Long story short - use your business credit card in the same capacity and get one that earns rewards and you’ll be making money from your purchases.

Last month my business card made me $33 just from charging expenses I was going to pay anyway.

2 main reasons to get a business credit card

  1. Earn rewards

    If you're going to be spending money anyway, why not get a little kick back for that spending?  If you're only purchasing from your checking account or via PayPal or any equivalent, you're leaving money on the table.  On the low end credit cards earn 1% cash back, which can really add up throughout a year.

  2. Build your credit 

    You can build your credit by using your credit card for necessary business purchases that you're making anyway. Of course, make sure to pay your balance in full each month to avoid interest charges or late penalties that can have an adverse effect.

3 Things to consider when choosing a business credit card

Picking the right credit card for your business really depends on your unique business.  Here are three things to consider when choosing the right fit for you.

  1. Rewards program

    If you are running social media ads, you might want to look into the Chase Ink Business Preferred card, which earns 3x points on social media advertisements.  If you spend a lot of money on Amazon in your business, perhaps the Amazon Prime Rewards card, which earns 5% on Amazon purchases, is best for you.

  2. Annual fees

    Does the card have an annual fee?  If so, it may still be worth it but you need to factor the cost of the fee into your determination. 

    Let's do an example here. Say you spend $20,000 per year on a credit card.  You are choosing between Card A, with $0 annual fee earning 3% cash back and Card B with a $95 annual fee earning 5% cash back.

    Card A: $20,000 x 3% = $600 cash back = $600 net benefit
    Card B: $20,000 x 5% = $1,000 cash back - $95 annual fee = $905 net benefit

    In this case, Card B is the right choice.  But if you only spent $2,500 a year then Card A would be better suited for you.

    Card A: $2,500 x 3% = $75 cash back = $75 net benefit
    Card B: $2,500 x 5% = $125 cash back - $95 annual fee = $30 net benefit

  3. Interest rates

    If you're doing as I suggest and only purchasing what you can afford and paying your card in full by the due date each month then this should be a non-factor for you.  But if you must pay interest, you should always consider the interest rate of a card. 

How to avoid getting into debt when using a business credit card

  1. Start small

    If you've never had credit before or if you have personal debt and are afraid of getting your business into debt too, then I recommend starting small.  Begin by making only small recurring purchases that you always have the money for and cannot be increased by not paying attention to your spending.  Examples are monthly recurring software subscriptions that you've been managing to pay monthly from your checking account.  Think Zoom, GSuite, Calendly, utilities, etc.

    As you get used to paying this off and see you're able to stay out of debt, you can gradually increase what you're charging.

  2. Only buy what you can afford

    Only charge what you have enough money in the bank to cover.  This will help you avoid getting upside down.  That means checking your bank balance BEFORE swiping your card.  Don't have it?  Don't charge it.  Simple as that.

  3. Pay the card off in full each month on or before the due date

    As I mentioned earlier, it's generally frowned upon from a financial perspective to pay bills before they're due.  However, if this is to keep you in line on money management and prevent you from spending money in your checking account that is allotted for charges on your credit card, I give you permission to throw this out the window and pay your card off early to prevent overspending else where and finding yourself getting hit with interest and into a cycle of overspending.

  4. Start by making regular payments shortly after charges 

    Taking the last step a step farther, if you are really scared of spending the money before the bill is due, then start as small as checking your bank balance, charging the transaction on your credit card, and immediately transferring the money from your bank to your credit card.  This will allow you to make the payment, avoid interest, build credit, and still earn points.  Eventually you will get your habits under control and go from paying immediately, to paying every few days, to paying weekly, then twice a month, and eventually monthly.

How to make your business credit card work for you

  1. Charge any expenses that don’t bill you an extra credit card processing fee

    Once you're in a healthy cycle of only charging what you need and can afford, make it a rule to charge any item that you can, so long as it doesn't charge you a processing fee greater than the rewards points.

  2. Pay your balance in full each month to avoid paying interest

    This is worth repeating.  Make sure you're making full payments on or before the due date or the cost of the interest will outweigh the benefit of the rewards.

  3. Regularly review your selected rewards category to be sure you’re choosing the one that will earn you the most rewards 

    Credit cards often have many rewards categories and you can choose your category.  Be sure to really look at your spending and choose the category that will give you the greatest reward.  Review these categories quarterly to be sure you still have the most beneficial selected.

Bonus tip 

If you ever accidentally miss a deadline by a day or two, call the bank and ask that they reverse the late penalty and interest as a one time courtesy based on your excellent payment history

Key Takeaways:

⭐️ Charge what you can afford
⭐️ Pay your balance in full
⭐️ Get a card that earns rewards
⭐️ Make sure the rewards category is the one that will earn you the biggest rewards (I review this quarterly or so and Bank of America even shows you which one is best for you based on your history of purchases
⭐️ Sign up for a card when they’re running promotions and you’ll often get up to $200-300 in rewards for meeting certain purchase thresholds
⭐️ I hoard rewards like a hidden savings account and redeem them on rainy days
⭐️ If you ever accidentally miss a deadline by a day or two, call the bank and ask that they reverse the late penalty and interest as a one time courtesy based on your excellent payment history

⭐️ ⭐️ If you run Facebook ads, look intoChase Ink, which offers higher rewards for that

Debt is a tricky subject, but being too debt averse can actually be costing you money.

What's Next?

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Be sure to sign up for free monthly bookkeeping & tax reminders sent straight to your inbox to be sure you stay on track and never miss a deadline.