During a busy day running errands, I took out my credit card many times for shopping. When I went to pay my credit card bill, I didn’t realize until later that I used my business credit card for several personal purchases.
This is an honest mistake: I have a business credit card and a personal credit card from the same issuer, and they look almost identical except for adding my company name to the same card.
To make sure I don’t confuse them again, I bought a cheap case for my business card and wrote “biz” in capital letters on the front.
Credit card is a popular financing method.Whether you are just Start a business, To develop an existing business or a freelancer, most of your purchases rely on credit card financing.
Some credit card errors, such as mine, are quite harmless. I fixed this error and it did not cause serious damage. Others can be very expensive.
Here are five business credit card mistakes you should avoid:
1. Mixed business and personal expenses
Commercial credit cards can easily track commercial purchases. However, if you also use your credit card for personal purchases, you may have a headache when filing taxes, especially if you do not carefully record the receipt.
In addition, if your card is not specifically used for commercial purchases, you may lose the ability to deduct interest or annual fees. (Please consult your tax advisor.)
If your business is incorporated, mixing corporate and personal purchases may make it more difficult to maintain the legal protection of your business entity.
solution: Use yours Commercial credit cards for commercial purchases And personal credit cards for personal shopping.
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2. Financing the wrong purchase
Your credit card is not only a convenient and safe payment method; it may also provide a credit line that allows you to fund purchases over time. Using your credit card in this way is convenient and does not require a new credit application or opening your request to the lender for review.
Since some card issuers provide 0% introductory APR for up to 12-18 months for commercial credit card purchases and/or cash advances, credit cards may provide an inexpensive way to protect your business cash flow.
However, credit cards are most suitable for short-term financing needs. Otherwise, once the low introductory interest rate expires, you may find that your business is burdened with expensive debt. By allowing you to extend the payment for several years or even decades, the minimum payment complicates this issue.
solution: For bulk purchases or long-term financing, other types of small loans can be considered Commercial financing Examples include equipment financing, term loans, and even SBA loans.
3. Missed rewards
Commercial credit card rewards can increase rapidly. However, if you have not considered your reward recently, you may not be able to get the correct reward.
A perfect example now is travel rewards. Maybe you paid a high annual fee for the premium airline mileage card, but you have cancelled your recent face-to-face business travel. Or, your fuel costs may increase, and a gas card with reward cash back can save you money.
Finally, if you are considering changing to a new card, please take into account that many card issuers will offer welcome offers of extra points, miles or cash back, provided that you reach a certain consumption threshold within the first few months of holding the card. The welcome offer (also known as the “limited time offer”) can be a real reward for spending time choosing and applying for a new card.
solution: Review your credit card rewards program annually to ensure that you take advantage of the benefits provided by your credit card and consider whether it is time to make changes.
4. Late payment
You should always try to pay your credit card bill on time. Doing so can protect your credit score and help you avoid late fees.
But for business credit cards, paying on time is more important. That’s because you are unlikely to get the same leeway as a personal credit card.
Commercial credit cards are not protected by the Credit Card Act like personal credit cards. Missing even an hour of payment, your issuer may (and will) increase your interest rate to a “default” or “penalty” rate. This new rate applies to existing balances and new purchases.
solution: Set up automatic payments of at least the minimum amount. As long as you pay the minimum amount on time, you will not suffer the consequences of missed payments.
5. Become a victim of fraud
Credit cards, including commercial credit cards, provide the best fraud protection of any payment method. You can object to unauthorized purchases and purchases of goods or services that are not delivered as agreed. These protections stipulated in the Loan Truth Act apply to consumer and commercial credit cards.
But you may still be plagued by fraudulent purchases. how? Here are two examples:
* You did not pay attention. If you don’t review individual charges when you pay your credit card bill, you may end up paying for unmade or unapproved purchases.
* You provide an employee or contractor with a card, and then the employee or contractor makes an unauthorized purchase. If you have authorized them to use your card, then you are responsible for all fees they charge.
solution: Check each credit card statement carefully. Set spending control on the cards you give to others. Use virtual card numbers for repeated transactions (if any). And set up alerts to immediately notify you of transactions that exceed typical spending patterns.
Business credit cards are a smart way for your business to pay for purchases and manage the ups and downs of cash flow. Just use them carefully to maximize benefits and reduce the risk of standing out.
