Business credit cards can certainly come in handy. Especially, in terms of managing cash flow and also when you're just starting, they can help with some of the initial upfront costs. That said, you want to be careful with a business card and don't extend yourself too far with it. You can quickly start accruing debt that you might not be able to pay back—this, in turn, can seriously hurt your FICO.
Here are a few do's and don'ts when it comes to using your business credit card wisely.
Do: Research Terms
Each card is different and consequently, each card has its associated terms and fees. Know what you're getting into before signing up for a card. Check on things such as interest rate, late fee charges, and also international transaction fees if applicable.
Don't: Use the Card in Cases of Bigger Emergencies
If you have an emergency arise, your first thought might be to go to the card. The problem here is that once you have put that much money on your business card if cash flow isn't where it needs to be, it could make it almost impossible for you to bounce back. The best course of action is to start an emergency fund right from the very beginning and rely upon that to cover larger costs that come up.
Do: Use Your Card Between Payments
Purchasing smaller items with your card and while in between payments is perfectly fine. As long as you're paying it off at the end of the month after you do have money come in, then this could be a great way to build credit. Some common expenses business owners use cards for office supplies, tools, materials, on occasion also payroll.
Don't: Max Out the Card to Its Limit
The key is really to keep card usage manageable. If you're maxing it out, odds are, you won't be able to pay it off come month's end. Debt grows, fees and interest grow until ultimately it gets to a point where potentially you can no longer handle the amount owed. Not a good position to be in. Plus, keep in mind that once you're using over thirty percent of your limit, this will negatively impact your score.
Do: Pay Credit Card Bills On Time
Late fees can add up fast. And if you do pay off the entire bill upon its due date you stand to increase your overall credit score. Your goal is to have a perfect payment history. If though, it is a difficult time, at least manage to make the minimum payment when it is due to avoid those costly late charges.
First Union Lending is here to help. We have business credit cards, short term loans, lines of credit, among other such programs to help your company get the cash it needs—for whatever reason, even if just to weather the storm. Call today and let's gets started!