Five Advantages of a Small Business Credit Card

You’ve done it. You started your small business, and you’re ready to hit the ground running. But soon, you might realize the financial challenges of operating a small business. You might find yourself struggling with maintaining a positive cash flow, tracking your spending, or accessing credit to expand your business. You need extra funds, but getting a bank loan can be tedious, complicated, and overwhelming. This is where a small business credit card can help.

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Not all business credit cards are created equal. Some specifically cater to small business owners through customized rewards, unlimited cashback, and higher credit limits. In this article, you’ll learn the major advantages of having a small business credit card and how you can maximize these benefits.

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1. Separation of Personal and Business Expenses

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You might initially use your personal credit card to fund your business. However, the more your business grows, the more difficult it will be to know which transactions were used for your business. A credit card dedicated to business expenses will help you accurately track your spending, not just for bookkeeping but for tax write-offs. Some of the eligible tax deductions for small businesses include automobile expenses, equipment, and office supplies so you need to record them correctly. One way to ensure you have accurate records for tax filing is to link your credit card with your accounting software.

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2. Simplifying Expense Management

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Credit card statements have detailed information about your transactions, which can be categorized by merchant type or spending category. This makes identifying your purchases and receipts so much easier. Expense management providers can integrate directly with your business credit card to record and categorize your transactions in real-time. You can also take pictures of your receipts and upload them to these apps or platforms so you’ll always have a copy, no matter what.

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These providers also offer corporate cards with more customizable controls, including spending limits and employee access. They also provide real-time reporting to immediately identify suspicious or unauthorized transactions and areas where you might overspend.

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3. Easy Access to Credit and Improved Cash Flow

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Credit cards are a revolving line of credit to cover your short-term expenses without using all your available cash. This means you’ll always have access to credit (and money) provided that you’re paying off your loans consistently. The straightforward application process is easier than the paperwork you need for business loans.

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Plus, a business credit card can serve as your backup emergency fund for unexpected expenses, so you don’t have to dip into your personal savings. Many credit cards also have an interest-free/grace period (an average of 21 to 25 days) if you pay in full by the due date. Some offer spending limits that increase based on your business revenue, such as Visa’s Revenue Business Card.

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4. Rewards and Incentives

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Business credit cards typically come with rewards and incentives to encourage you to use them frequently. These rewards include points you can redeem from partner companies, cashbacks, or travel miles based on your spending. Some cards, like Bank of America’s Business Advantage Customized Cash Rewards, also offer higher rewards for specific spending categories, and you can even choose which category.

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Meanwhile, incentives can include sign-up bonuses where you can earn many points if you meet a spending threshold within a specific period. Some credit cards offer no annual fees and a 0% introductory annual percentage rate (APR). Plus, your cash rewards typically don’t expire as long as your account is active.

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5. Building a Business Credit Profile

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Building a strong business credit profile is necessary if you plan to apply for a business loan or line of credit. Every time you make timely payments on your business credit card, it’s reported to business credit bureaus, which helps build your company’s credit history and boost its credit score. Your improved credit score will make applying for larger loans with lower interest rates easier. You’ll also be able to secure better terms from vendors and suppliers. Being creditworthy also opens many doors for external funding and partnerships because banks and investors can see that you’re managing your finances responsibly.

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How To Maximize the Benefits of Small Business Credit Cards

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Now that you know the advantages, it’s time to learn how to use these credit cards for the most bang for your buck. Aside from offsetting processing fees, here are some tips:

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• Identify your business’s major purchases to choose the card with the highest cashback or rewards for those expense categories.
• Pay monthly to prevent interest charges and maintain a good credit score.
• Understand the rewards program and mechanisms to take full advantage of discounts and cashback.
• Maximize sign-up bonuses but ensure you can reach the spending threshold without sacrificing your cash flow.
• Regularly review the terms and conditions to update you on potential fees and interest rate changes.
• Explore the additional benefits, such as purchase protection, travel insurance, and extended warranties.

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Streamline Your Small Business Credit Card Usage With Decimal

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The right business credit card will help you optimize expenses, save money through rewards and incentives, and stabilize your cash flow. Additionally, you can integrate your business credit card with a bookkeeping and expense management system to leverage its benefits. Decimal can help build the right system for your business so you’re always on top of your recordkeeping, expense management, and tax filing.

‍Schedule a meeting with us to learn more about our small business bookkeeping services.