If you plan to start a business anytime soon, it would be helpful to avail a business credit card. We all know how much a personal credit card can benefit our lives, and the same goes for your business. However, you must understand how to use it properly. This article will help you with that.
How to Pay Monthly Balance Using a Credit Card
Using your business credit card to make a purchase for your business means you know your profits can eventually pay for it. This becomes a problem when you don’t get to settle your monthly balance. To use your credit card in paying for this, here’s what you can do:
Use One Card to Pay Monthly Bills
If you’re using your business credit card to pay for monthly bills, make sure that you’re only using one to pay for all of it instead of using multiple cards. It will make it more likely for you to earn rewards and monitor all your charges. Still, you must keep track of this expenditure to ensure that you don’t go over your credit limit.
Pay for the Full Balance
It’s extremely beneficial for you if you pay the full balance at the end of the month. This will diminish your loan interest, and you wouldn’t have any debt record on your business credit record, which means you’re more likely to increase your business’s credit score.
If you can’t pay for the full balance, you have the option to make smaller payments over the span of a few months, but you have to make sure that you pay at least the minimum amount required. Otherwise, you would pay a fee for late payments.
On the other hand, if you really can’t pay for the monthly balance, it would help if you have a real estate property on a mortgage. It would be helpful if you know the basics of cashing out in mortgage refinance as this would allow you to receive a check of a certain amount and use that money to pay for your business’s credit card debt. The amount of money you receive would then be added to your mortgage, which has a lower interest rate.
Credit Card Mistakes to Avoid
To prevent poor credit card usage, you may want to understand the importance of a few things. Some people who don’t understand how credit cards work almost always have the wrong beliefs on credit scores. Hence, we’re here to clarify a few of that.
While you must pay at least the minimum amount necessary each month, it is not advisable. When you only pay the minimum amount, it also means that you’re continually paying for interest, and the longer the loan stays in your account, the bigger the interest you pay for. If you want to avoid debt or paying for interest, paying the full balance or over the minimum amount necessary is essential.
Not Reviewing Your Billing Statement
Do not ever make the mistake of neglecting your billing statement since it will include every transaction made on your business account. You must recognize these transactions and identify if there is any sign of fraud or payment mistakes. You can review your billing statement every month, but it’s best if you do so weekly to guarantee you can revoke any mistake or anomaly immediately.
Availing of Cash Advance
We know it’s tempting, but don’t use the cash advance feature of your business credit card. Not only is it risky, but it also has the biggest fee and interest of all the features you can use on a business credit card. Some credit card providers charge up to five percent of the total sum of money you plan on borrowing.
Maxing Out Your Credit Card
Make sure that you don’t reach your credit limit. Otherwise, you would have a higher utilization rate. When this happens, your business’s credit score decreases, and it will be harder for you to apply for other loans.
If you tend to get close to your credit limit, but you also don’t have any trouble paying for it, call your credit card provider. They would most likely be more than happy to increase your business credit.
Applying for Too Many Credit Cards
While applying for multiple credit cards is often not a problem, it’s not ideal if you apply for them with little intervals. Whenever you apply for a credit card, your borrower will make a hard inquiry. Too many hard inquiries on your account will be detrimental to your credit score, and lenders will see you as a greater risk.
A credit card for your business would be a great tool for your success, but that’s only true if you know how to use it properly. Ensure that you avoid the most common mistakes business owners make when they use credit cards, and stick to those methods that will help your business.