Business credit cards can provide a convenient source of funds for companies who need access to cash on demand. In fact, there are many advantages to company credit cards – if they are used wisely.
This article includes:
- The pros and cons of business credit cards
- Strategies to avoid spiraling credit card debt
- What to do if your credit card usage has gotten out of hand
The Pros and Cons of Business Credit Cards
Used wisely, a business credit card may offer benefits such as:
- Improved credit rating
- Providing a financial cushion
- Rewards/incentives
- Being easier to obtain than a small business loan
- Making bookkeeping easier with itemized statements
And the drawbacks:
- Variable interest rates
- Less protection than consumer credit cards
- Interest rates that are several times higher than business loans
- Security issues, especially when multiple employees have access
Strategies to Maximize Business Credit Card Benefits
Before you or your employees even touch your business credit card, have a solidified plan for how you’ll manage and track usage, rules for use, and consequences for abuse of privileges.
Here’s what you should include in that plan:
- Accountability rules. The simplest way to hold people accountable is to require receipts – no exceptions. Rescind the credit card privileges of anyone who fails to organize and hand over receipts on time or who consistently makes unauthorized purchases. Your policy should be fair, but no-nonsense.
- Which employees have access to credit cards. Be selective, but again, be fair. Too many cards can create accounting chaos, and you’ll quickly lose control of overspending. Some criteria you might consider using are seniority, position, or performance history.
- Clear spending limits. Set limits on how much employees can spend, how often they can use the card, and what kinds of purchases they can make. You can implement limits across the board or set individualized limits based on an employee’s needs and responsibilities. Whatever you do: set limits, put it in writing, and have your employees read and sign it.
- Mind your credit card activity. Fairly common sense, but easy to lose track of. To ensure you keep on top of credit card spending, you can set up general or specific activity alerts to be received via text or email and online or mobile banking for the latest account activity. Have your accounting department regularly review credit card statements line by line to double-check only approved purchases are being made. Lastly, avoid making single, large purchases, as you’re more liable to max out your credit card and incur exorbitant over-the-limit fees.
- Pay your credit card in full at the end of each month. If you pay your bill in full before the end of the monthly grace period, which stretches from your statement date to the due date, you can avoid paying interest altogether. Make this standard operating procedure!
And If All Else Fails, Here’s What to Do If Your Credit Card Spending Has Gotten Out of Hand:
If you find that debt accumulation is starting to outpace your ability to pay and potentially threatens your business, you should know there may be a better alternative to bankruptcy available to you.
Enrolling in a debt relief program allows you to make amends while saving you upwards of thousands of dollars and preventing you from having to shut your doors forever.
If you’d like to know more about debt relief programs, call our debt relief specialists at (636) 209-4481. PCS is different from our competitors in that our clients see debt relief before any payment is received for our debt relief services. Reach out now to restore your business!
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