First Person: Why Every Small Business Needs a Credit Card

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According to a report from the Federal Reserve, approximately 46% of American families have credit card debt. One quarter of those people have over $3,000 in debt. I admit it took a crisis situation to convince me it was important to have a business credit card for business travel. Once I had the card, I learned there were additional advantages that were useful. I got over thinking all credit cards are evil. They are only as dangerous as the user.

The Rewards of Using a Credit Card

Treat your business credit card with respect, and it does not control you. When I signed up for my card, I made sure it was a rewards card. I get rewards when I use it to shop for airline tickets, hotel rooms, restaurants, office supplies and fuel for the company vehicle. The reward points come in very handy. After saving them for over a year, I was able to use them to buy a new printer/copier for the office.

Curb Your Spending

My card is not used for any business expenditures that I could not otherwise cover with cash. One of my first Internet marketing clients is a broker for small business loans. He helps his clients build a good business credit score so they can secure a commercial loan. He advised me never to spend more than 40% of my available credit. The limit on my card is $5,000.00. I never allow the card to go over $2,000.00.

My client also recommended I read the fine print very carefully before signing up for the card. In 2009, the Credit Card Act was passed to protect consumers from unscrupulous practices on the part of credit card companies. Unfortunately, business owners are not protected in the same way, since business credit cards are not regulated.

The moment I get the bill in the mail, I have my bookkeeper cut a check for the full amount. Using my credit card in this way for the company is helping me to establish a business credit rating, separate from my personal credit. I researched several credit card comparison websites to find a card that had no hidden fees and reasonable interest rates, even though my plan was to never be in the position of paying these.

A Tool for Growing a Business

My bookkeeper appreciates how the credit card statements simplify her job. I am conscientious about turning in my receipts, but having the statement once a month provides a clear record of company expenditures. As long as I don't mix my personal expenses with my business expenses, my business credit card is an excellent tool.

*Note: This was written by a Yahoo! contributor. Do you have a small business story that you'd like to share? Sign up with the Yahoo! Contributor Network to start publishing your own finance articles.

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