I work with a lot of small businesses and almost every week, I’m asked a question about a business credit card. Some clients want to know if they should get one. If so, which one should they get. Others are worried about payment processing fees if their clients use credit cards to purchase goods. So, today, I’m picking a few of your business credit card questions and giving you the answers you need!
Can or should I use my personal credit card for business?
You can, but should you? Not if you can get a credit card in your business name but let's be honest, that's not always easy to do. If you don't have sterling personal credit you can get a starter card in the company name with a $500 limit and no benefits. Or you can use that personal card you've had for years that accumulates miles and go to Fiji....tough, tough decision....not. Using a personal card for business isn't wrong, as long as it's done properly. Here's the catch, stop using that credit card for personal reasons. If you want to use it for business, add it to your balance sheet, only use it for business, and reconcile it every month. I would never advocate commingling your expenses, so this separation is critical. The down side of using your personal credit card is that you delay the process of building up credit for your business. At the end of the day, you've got to do what is best for your business.
What credit card should I get?
It really depends on what's important to you. Do your research! 15 minutes of research can literally save you hundreds of dollars. Some of the factors to consider are annual fees vs interest rate. If a card has a lower interest rate but you have to pay $99/year to have the card, are you saving more than $99 in interest with that lower rate? If you're not, why pay the fee? The interest only hurts you if you carry a prolonged balance. If you're paying it off each month just to accumulate miles, take the higher rate, save your $99 and buy a nice dinner in Fiji. Another thing to consider is the rewards themselves. What is more important to you? Cash back or miles. Maybe your idea of a vacation is turning off the phone, closing the blinds and reading for three days straight. The miles aren't helpful if you're not the traveling sort. Take the cash back, buy more books, maybe a bottle of wine or three and have a grand old time. For research purposes, I have always found Nerd Wallet to be a pretty good resource for the latest and greatest credit card offers and they provide their own analysis.
Is there another alternative to paying all these credit card processing fees?
Let's flip to the other side of the transaction. I get asked all the time by frustrated business owners how they can avoid the credit card processing fees. Here's my answer, be glad you're young. Us old folks remember the days before mainstream credit card use and you had to hear nonsense like 'the check is in the mail'. So much more time and effort was spent on collecting money and let's face it, time is money. The time you spend collecting money is far more valuable than what you are paying in credit card fees. Try not to think about it in terms of what it's costing you and think in terms of how it's benefiting you - especially for businesses with higher volumes of transactions. Can you imagine having to collect 80 checks a month, waiting for them to clear, 2 bounce, costing you a fee from your bank? You have to take the time to track down the customer and get paid again and hope it works this time. Seriously, pay the fees and gleefully watch as your money pops into your account hassle free in two days. These fees are the friend that is kind of annoying but is really helpful. You don't have to invite them to Christmas but don't cut them out of your life either.
So, hopefully that answered some of your burning questions about business credit cards. If you have other questions about credit cards, or anything else, I’m happy to answer them. Just ask!
Written by Tom Barnhill, co-founder of Business by Barnhill