Once you get your business credit card, it does not mean that you charge everything to it. Also, not every business expenses belong to your business cards, for instance, payroll, high dollar buys, and legal settlements. Learn some of the rules that credit cards operate on as they are different from personal credit cards. For instance, at the first sign of financial stress, the issuers can lower credit lines and raise rates. Also, if you default or pay bills late on your business card, it can affect your personal credit history. Thus, as a smart business owner, you need to be careful with your business credit. Instead of misusing it, get companies that help build business credit in 30 days to improve your score and learn how to manage it best. In this article, you will learn of 7 expenses you do not want to charge on your business credit card.
Business trip extras
When you are on a business trip, not every expense belongs to your business credit card. So charging business trip extras on your business credit cards may feel okay and safe but will cost you eventually. For instance, if you want to have a manicure or spa treatment during a business trip, have it at the expense of your personal credit card. However, to entertain your clients, you can consider it a legitimate expense. However, use your business credit card within limits. The issue with charging trip extras to your business credit card is that they will come back and haunt. Since when you need a business loan and the lenders, you go to look at every detail of how you use business credits given to you as they do not only look if you pay on time.
Do not try to justify that some of your personal habits, more so the vices need to be charged to the business credit card. No matter how good of a reason you have, it is best not to charge it to the card. Plus, to the business trip extras, you never know who will be looking at your business credit charges on a future date. Always know, once you use the company’s credit card, you are broadcasting it as it will be a permanent record. For instance, you can put your air ticket and hotel on your business credit card. However, if you have to extend your stay to relax with your spouse, the extra expenses need to go to your personal credit card.
When you do not have enough working capital, it is easy to feel that you need a cash advance, and this is already a problem. So, taking cash advance and returning it is one thing. However, prospective lenders and card issuers may fail to help you depending on how much cash advance you take, how often you do it, and how long you take to repay it. Unfortunately, due to this expense, you may make your current card issuer to take your interest rate higher, close the account, or lower your credit line. For this reason, avoid using your credit card as a backup for your working capital, for it is best to use them for record-keeping. Hence they are more convenient to use for all the small purchases.
When you have legal settlements, and you are charging them to your business credit card. It is a sign that your business is stressed, and card issuers can get this signal. Thus, they will deny you any more credit, for they doubt your ability to repay them. Additionally, if you are paying more money than you can pay from your pocket, you will then be adding credit card interest to the tab. Also, you have an opportunity to negotiate if it is a legal settlement, and you can do so with cash your business has available instead of using our business credit card as an asset.
Every time you put payroll on your card is a sign that you are running out of money. Also, money experts advise that you need to change your business plan if you need to put your payroll on your business credit card. Not forgetting that your payroll is one of your business’s large expenses, and having to put it on the company’s credit card will cost you a lot of interest. Plus, there are other less expensive ways that you can finance your payroll expense, such as a small business line of credit through your credit union or your bank.
High dollar items
The high dollar items can be tempting, especially when your business credit card has enough room to purchase them. However, remember that your credit card is not your least expensive loan, and when you charge high dollar items to it, you will carry the balance for several months. In addition to this, you will pay a lot more interest that is not necessary. When it comes to such an expense, it is best to put money aside until you can afford to pay it off. More importantly, it advisable to avoid putting anything on your business credit card that you cannot pay off immediately.
Although some card issuers have banned charges to a high-risk investment like cryptocurrency. When your card can still have an option to charge on cryptocurrency, it is an expense you should avoid. Also, it is best not to use your credit card as a source of cash, and yet you are trying to grow your capital. Also, use a business credit card with great caution. Just because you can use it does not mean you use it in anything.
To sum up, the above expenses are best when not charged to your business credit to avoid the interest rates and inconvenience that they can cause for your business and financial status in general. Choosing whether to charge these expenses most times comes down to common sense as your business credit card is money you should use carefully.