Five Reasons Every Small Business Should Have a Credit Card

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When you think of starting a business, a business credit card is probably the last thing on your mind.  That was certainly the case with my business.  In fact, it was more than year into making money online before I even considered applying for a card.  And that was a big mistake.  I’ve now carried a Capital One business credit card for several years now, and there are five reasons why I’m glad I made the switch:

1.  Keeping business and personal expenses separate – A common mistake small business owners make is commingling personal and business expenses.  Commingling expenses makes determining your company’s profits and loss difficult if not impossible.  By obtaining a credit card in the business name only, you can easily delineate what you have incurred in expenses for the business. If possible, avoid using cash to pay for business expenses and never put personal purchases on your business credit card. Having a business credit card is a very easy way to keep all your business expenses in one place.

2. Making tax time easier – If you are like me, you dread tax time and the time and energy you exert gathering paperwork to complete your taxes. If you are a small business owner, you are even more put off with taxes because you have to complete both business and personal taxes. However, If all of your business expenses are made on your business credit card, you will not need to spend time sorting through your expenses. You can simply get a copy of your annual statement and easily see what money was spent and on what.  Having this information at your fingertips makes doing your taxes much easier.

3. Receiving cash back, travel or other rewards – Not only can business credit cards be used to segregate personal expenses from business expenses, but the best small business credit cards offer cash back and great rewards. Business owners have the opportunity to leverage their credit card spending and that of their employees to earn significant rewards. Cash, miles or points can be earned through spending on business credit cards and be applied to free business travel, profit, or given to employees for personal use. If you’re always using your card for business spending, the rewards can accumulate much faster than on a personal card as business purchases are likely to be larger and more frequent.  I use a cash back card, but any rewards card will add to the bottom line.

4. Managing cash flow by receiving a 25-day interest free loan – Credit cards can also be crucial for a small business to assist in managing cash flow. When a business makes a purchase using a credit card, they borrow money from the bank, which does not have to be repaid until the statement comes in the mail (or online).  If you pay each credit card bill in full, you will pay no interest.  The result is an interest free loan between the time of the purchase and the due date of your credit card bill.

5. Enhances small business owners credibility – Finally, it pays to have a business credit card if for no other reason than so people will take you seriously. Having a business credit card lends credibility to your business even if you’re just a one-man operation. Seeing the business name on the credit card instead of your personal name will evoke a sense of confidence in your clients. Consider going to lunch with a client and using cash to pay the bill. You look a lot more professional if you take out a business credit card to cover the cost.

Published or Updated: February 16, 2013
About Rob Berger

Rob founded the Dough Roller in 2007. A litigation attorney in the securities industry, he lives in Northern Virginia with his wife, their two teenagers, and the family mascot, a shih tzu named Sophie.

Comments

  1. greentea says:

    The advantages for getting credit cards are discussed in your article thoroughly. Credit cards can help you though sometimes they can pull you down with debts. Capital One business credit card might be a good option instead of other cards.

  2. This is definitely first on my list of things to do when I form my LLC. I’m hoping to use it for rewards and definitely keep things separate.

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