Smart Reasons to Save, Use and Invest Money

Why Business Owners Should Use Credit Cards

Today’s writing is from Mr Credit Card of www.askmrcreditcard.com. He is going to share his views on why it makes sense for businesses to use credit cards. BTW – please check out his best credit card offers if you are looking for a new credit card.

If you read the pf bloggesphere, you will realize that there are two school of thoughts regarding credit card usage. The first school of thought are from those that primarily use credit cards for earning rewards and cash rebates. Most of the time, they would pay their credit card bills in full. The other camp is totally anti-credit cards. Most have got burnt by misusing credit cards (ie having a credit card and getting into debt with it). Some have successful got rid of their credit card debt, while others are still in the process. For these folks, having a credit card in their wallet presents a temptation they sometimes find hard to resist.

Then, there are those in the middle – who have gotten into credit card debt and got out of it. Rather than blaming credit cards for their behavior, they acknowledge it was themselves who got their spending out of control.

While you may argue about this forever, I would like to suggest that if you own a business, it would be foolish for you not to have a credit card. That is because of the numerous benefits that you might be missing if you were not using them.

Cash Flow Management is very important – In it’s simplest terms, cash flow management is simply making sure you have enough money in the bank when you have bills due. How you manage your cash flow depends on how often you are paid, and when are you bills due. For a business, cash flow management is very important. The key objective is to get your cash from your customers as soon as possible and “stretch out” paying your bills for as long as you can.

Most businesses have lines of credit with their suppliers for exactly this reason. Well, credit cards give you a line of credit and by definition a credit extension for 30 days. If you pay your supplies by cash, check or debit card, you have to pay immediately.

Save Money with credit cards is real – While some may question the hassle of using credit cards to save money on a personal level, for businesses, the savings can be real. Earning 1% to 2% cash rebates on a cash back business credit card when your business charges say $10,000 a month on the card results in real substantial savings.

Similarly, a business owner that travels a lot would be a fool not to use an airline credit card to earn miles which he or she could use to get free airline tickets for his business travels.

Insurance and Warranties – Insurance and extended warranty features are other great benefits that would benefit anyone. Many credit cards have this feature where you can get extended warranty beyond the manufacturer’s own warranty if you use your credit card to pay for the item. This feature will come in very handy when you make large purchases like computers or servers for your office, or any office equipment. This can really add up to a significant savings because stores often charge for extended warranties.

Another feature businesses can save money on is the car rental collision damage insurance. For businesses who have salesperson traveling and renting cars, this feature alone will save them lots of money a year.

Expense tracking – Business credit card allows a business owner to set credit limits on how much employees can charge to their cards. Many also send quarterly statements to business owners to enable to et a better understanding of expenses breakdown.

Build Business Credit – We have all heard that building a good credit history will allow you to get lower rates for mortgages and auto loans. Having a good business credit history likewise will enable a business to get better rates (or even get) for business loans like working capital. Aside from opening a couple of business bank accounts, having some form of credit that reports to business credit bureaus like Experian Business and Dun & Bradstreet helps to get your business on the credit map! Having a business credit card is one of easiest ways to do this. It is vitally important to use a proper business credit card and not a consumer card because consumer cards do not report your timely payments to business credit bureaus.

Some Vendors Only Accept Credit Cards – Like it or not, some vendors only accept credit cards for payments. Part of the reason could simply be that they want the security and less creditor risk when using credit cards rather than risking a default by their customer. In cases like these a business has no choice but to use a credit card for payments.

Summary – Lots of personal finance bloggers are against credit cards because they have gotten into trouble in the past with it. However, when one owns a business, eventually, using a business credit card is almost a must simply because almost all businesses use them and they offer lots of benefits that businesses could take advantage of to save money.

Thanks Mr. Credit Card, for such a great guest post on the pros of credit card usage for business owners!

While the post by Mr. Credit Card is focused at business owner, for individuals, you must choose which practice works for you. 

For me, I use credit cards for the great perks that are identified above.  You must know yourself and do what works best for you though!

- MR

5 Responses to Why Business Owners Should Use Credit Cards

  1. LeanLifeCoach says:

    Even before the introduction of rewards and cashback, cards provided a number of benefits to the user, no the least of which was convenience.

    Business or not, corporate or not this still holds true.

    We should all keep in mind that credit cards don’t kill (finances), people do.
    .-= LeanLifeCoach´s last blog ..Undercover Boss =-.

  2. The Coach is spot on as usual :)

    Even without the rewards, I would still use a credit card. But, I would also make sure I would pay it off every month!

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  5. Small business owners now have a wide variety of credit cards to choose from, and it makes it difficult to choose the best one for your small business. As a small business owner, you will need to decide which features you think that the company will use most often, and if they are worth using and having, before applying to a card. Many of the credit card companies now offer many attractive tools that can and will help each small business owner in their everyday spending and tracking.