Many startups rely on credit cards to finance the business until the cash begins rolling in. Reliance on credit cards to carry your company’s debts from month to month can be dangerous. But credit cards are useful if you follow these nine rules:
Rule #1 — Have a business plan and know your credit history.
A business plan is a good way to set financial limits on your spending before you start charging. Taking into account your credit history is an important aspect of planning for your financial future, because it is what banks and credit card companies use to determine your credit limits.
Rule #2 — Know how you are going to use the credit cards.
When creating your business plan, factor in how you are going to use your corporate cards. Will they be used for travel only? Or will you use them to purchase office supplies? Planning how you will use your credit cards before you apply for them will help you set parameters for their use.
Rule #3 — Pay more than the minimum every month.
When paying off your credit card debt, it’s important not to carry a large balance from month to month. The more debt you carry over each month, the more interest you will pay. Pay as much of your monthly bill as you can — it’s best to pay the whole thing at once, but try to carry as little debt as possible.
Rule #4 — Avoid cash advances.
Cash advances come with an extremely high interest rate. It’s cheaper to charge than get a cash advance.
Rule #5 — Don’t charge expensive items or services.
It’s easy to tie up a large portion of your monthly cash flow paying off a recurring debt on your credit card. Instead of charging $7,000 worth of office equipment, take out a small business loan. You will end up spending much less money paying off a $7,000 small business loan than you will paying off your credit card with its high interest rate. For more information on obtaining a loan for your small business, speak to a BankOne service agent.
Rule #6 — Read the fine print.
Never assume that all credit cards are created equal. Read the terms and conditions of your credit card to avoid accidentally incurring additional charges.
Rule #7 — Reserve business credit cards for business use only.
Keeping your business and personal charges separate will help keep your business finances on track and focused. It will also keep your personal credit history free from any problems related to your business credit.
Rule #8 — Don’t get too many credit cards.
Keep things simple. The fewer cards you use, the better sense you will have of your company’s spending patterns and potential debt exposure.
Rule #9 — Get some bang out of your credit card.
Sign up for a credit card that gives your business additional perks for usage. BankOne credit cards, for example, offer card holders discounts at office supply stores, car rental agencies and hotels, even on telephone calls and travel insurance. Visit the BankOne Credit Solutions [http://www.bankone.com/busbank/solutions/credit/] section of the Web site for more information on BankOne credit cards or to apply online.
