Business Credit Cards: How to Use Them

Best Business Credit Cards Canada

A business credit card is one of many ways to pay for goods and services. They offer plenty of advantages over cash or debit payments — including the ability to make large purchases without having to pay for them all at once. There’s the convenience factor of letting multiple employees make purchases with the same account. And there’s also the rewards and perks programs.

However, a small business credit card can also help you manage your company’s cash flow — especially if you use it as your company’s primary purchasing tool. 

When used correctly, credit cards can streamline your company’s spending practices. But, you’ll also need to track your cash flow with PayPie to make sure your credit cards really work for your business.

How to use a business credit card strategically

When used effectively, business credit cards can provide interest-free financing, travel rewards or cash back, other perks and discounts on commonly purchased goods. They’re an easy way to give employees purchasing power and they come with reporting and fraud controls.

Using your business credit card for interest-free financing

Getting a loan to pay for a much-needed purchase can be a lengthy task for most entrepreneurs. And that’s not even delving into interest rates, which can leave a bitter taste in your mouth when you need to access financing. Spending on the business credit card you open, there’s an opportunity to use promotional interest periods to finance large purchases — all without having to pay a dime in interest.

If you and your business have an exemplary history with credit, you may qualify for a 0% introductory APR business credit cards.

As long as your credit limit allows for it, take advantage of your introductory interest rate to make large purchases and pay them back over time without interest. You can also time your purchases to correspond with other perks, such as cash back or points, if your credit card includes them.

Note: Not every small business is eligible for 0% introductory APR cards and they’re not available in every country. (Sorry, Canada.) Thankfully, there are plenty of alternatives out there — particularly in the form of non-traditional short-term financing

Earning travel or cash back with your business credit card

One of the most common reason entrepreneurs open business credit cards is the ability to earn travel rewards or cash back.

When looking at these kinds of rewards programs, know exactly what benefits suit your needs. Determine how you’d maximize your points or cash back. Then, pick a card that will help you get the most out of your purchases.

Keep in mind that reward programs vary substantially from one credit card to the next. Some cards only work with specific airlines. Others offer additional miles for purchases from specific categories or retailers.

Do the math to make sure you know which reward program will benefit you the most. Literally, take a look at your current spending and see how the cash back or points would stack up.

The Best Business Credit Cards in the United States | The Best Business Credit Cards in Canada

Using your business credit card for perks and discounts

While travel and cash back are pretty popular, there are other kinds of reward programs. These include reward points that can be redeemed for any range of goods and services and discounts on common business purchases.

If these kinds of perks are for you, consider opening a credit card account at a store you frequent for your business. For instance, if you’re a landscaping contractor, a reward card from a home improvement or garden store makes sense. Many big-box retailers and online stores offer credit cards that reward you handsomely for making purchases with them through your store card.

Take note, though, that these cards do not offer perks for shopping at other stores. And, in some cases, offer lower cash back amounts than you’d find with a conventional small business credit card.

If you’re interested in reward points, also be sure to know where you can use them.

Having more than one business credit card

Having several business credit cards can be a mixed blessing. Your credit won’t get dinged for having several credit accounts (as long as you pay on time). But you could get penalized if you apply for more than one card at once.

That, and having several credit accounts defeats the purpose of managing cash flow through your business credit card, as you won’t have only one card through which purchases are made.

Using a business credit card for employee purchases

It’s impossible for a small business owner to be everywhere at once. This becomes painfully obvious when you’re tied up with other work, but are the only person with the authority to make a last-minute purchase. Business credit cards are a solution that empowers employees while maintaining a comprehensive view of where the company’s money is going.

Most business credit cards provide account holders with additional employee cards free of charge and all transactions are recorded on the main account contact so that you can accurately track expenses. In a worst-case scenario, account holders can also close accounts or deny purchases in order to prevent fraud and control costs.

Looking at business credit cards and cash flow

How To Use Business Credit Cards to Track Spending

Making your business credit card the default way to pay for purchases lets you use your credit card statement/expense tracking software to get a snapshot of your company’s spending over a set period of time.

When you use your business credit card to monitor spending, be diligent.

  • Your credit account has to be a direct substitute for a debit card, cash payments, or checks.
  • If you’re only making some of your purchases on your card, you’re not going to get a comprehensive picture of your spending activity.
  • Once you’ve consolidated your purchasing methods to your credit card account, make sure you’re using the card like you would cash.
  • Don’t spend more than you can afford to pay off during each billing statement, lest you incur hefty interest fees that you could have otherwise avoided.

Remember that business credit cards can impact personal credit

Your business credit card likely included a personal liability guarantee, which means that you’re personally responsible for paying any business credit card debt that the company itself cannot afford. For example, if your company goes bankrupt, you’re still personally liable to pay for any and all outstanding credit card fees. In this regard, there’s little that separates your professional debts from your personal obligations.

Read More: How Business Credit Cards Affect Personal Credit

Track, track, track

Add your credit card account details into your accounting software. Most credit card companies integrate with tools, like QuickBooks Desktop or QuickBooks Online, so that your statement information can be added to your overall financial data and reports.

In turn, when you connect your accounting software to a cash flow forecasting tool, your credit card information will be included in your expense analysis.

Beyond the business credit card

For all the perks of using a business credit card to track and conduct day-to-day spending, this method is only one of many strategies out there for keeping your company’s financials in order.

As credit cards are only one part of the spending picture, every entrepreneur should conduct regular cash flow forecasts in order to track all a business’ inflows and outflows. The sooner you track your cash flow, the easier it is to spot seasonal trends or potential emergencies before they occur.

While keeping tabs on your cash flow, you can also monitor your company’s credit risk. Knowing how creditworthy your company is before you begin applying for credit cards can also save you a ton of paperwork later on.

QuickBooks Online users can get started today. Simply sign up, connect your business and run your free report — which includes a proprietary risk score.

PayPie currently integrates only with QuickBooks Online. Additional integrations are in development. 

This information does not replace the expertise that comes from working with an accountant, bookkeeper or financial professional.

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