Business Credit Cards Can Help Preserve Cash

Category: Finance, Credit.

Whether you' re starting up the new business or have been established for a number of years, the use of business credit cards can be a great benefit to your business.

On top of that, paying off the credit card bill on our regular basis can also help a company build its credit standing and improve its ability to obtain loans for future expansion and growth. These cards come in handy when it comes to handling operating expenses or unexpected costs. Virtually all business credit cards are going to be a under the name of the owner of the company. Various financial institutions, as well as banks, will require a name and other personal information before even considering issuing you a card for your business. The credit card issuer requires this information and holds that cardholder responsible for the payments. Interestingly enough, even if the business has an outstanding track record and has a good credit rating, if the owner of the business has a lousy credit rating, the rates offered to the business will be higher. Having detailed billing will provide the business owner with information on every purchase made as well as providing proof when it comes to tax deductions.

Many card companies will offer various programs for businesses and will also supply detailed billing information that can be used for accounting purposes. The majority of business credit cards require written authorization for charges being made by someone other than the business owner. Business Credit Cards Can Help Preserve Cash. This is a good safety mechanism to have because it will protect the business from fraudulent use. Depending on the interest rate of the business credit cards that your company is being charged, if you need to upgrade assets and equipment, it may be cheaper to purchase them on your credit card instead of using your business cash. However, assets such as office furniture or equipment, treated as an asset investment and with lower credit card rate, can make better economic sense that paying with cash. Of course, there will be certain business expenses that you will not want to charge on the card, such as payroll.

The tax deduction could be higher then the interest you will pay. One thing for sure, you do not want to use these cards for personal use. Once you have received your business credit cards, care and caution will be required. First and foremost, it will be necessary to keep your personal and business expenses separate for both tax and accounting purposes. Any personal charges inadvertently charged on your business account will have to be well documented in order to maintain proper legal separation. You do not want to have your business paying interest on your personal stuff, such as a family's night out at the movies or a trip to the supermarket store.

That being said, a business credit card is a great tool for any business to have. Just make sure that the card is used for business purposes only.