Credit Cards, Good Or Bad?

It’s a given, we must be careful with credit card spending as individuals; however, this is also true for businesses. When you put a large order of equipment or merchandize for your business on a credit card (essentially borrowed money, which will gain a high percentage of interest if it’s not paid off on time), you better be able to cover the cost financially, or you will slip into debt easily. There are many advantages and disadvantages to having a credit card as a small business, and since at FACETS Business Solutions we’re sticklers for keeping our clients’ finances in line (and as bookkeepers, we’re constantly dealing with business credit card records), we’ll tell you a few of the main ones.

Advantage – Purchase record keeping: As a business it’s so important to know what you’re spending money on, and a credit card statement keeps track of the many and various purchases you make every month. This record can be verified against a budget to see if business spending is correct, and it can be a point of discussion if disputes arise. It also becomes a legal record of everything that your business has spent and those it’s claiming back during a tax year.

Disadvantage – High interest Rate: Most cards come with a high interest rate, although some banks do offer lower interest cards. No matter though, an interest rate is just that, extra moneys you must pay on purchases that accumulate for months – you may end up paying many times over for purchases that should have been easily paid off. As a business owner, if you’re not on top of the payments before deadline, you will lose money (this is off your profit!)

Advantage – Online purchasing: We live in an Internet world, and many small businesses are e-commerce and deal with e-commerce. The choice to purchase products and services of quality for the right price is literally at our fingertips. Mostly, we pay online via credit card. Without a credit card, it’s just too difficult to take advantage of so many options for goods and services locally and globally – so, point for credit card!

Disadvantage – Too easy to spend on credit: Office supplies, business lunches, packaging for merchandize and that traffic ticket you got on the way to the office, all put on credit card, can rack up quickly. You can get into debt much too easily. Again, this relates to the interest rate disadvantage, but the fact remains, if you’re not sure of the amount you have in the bank that you are able to spend, the skies the limit for what you will spend (or at lease as high as your credit limit, which can be sky high!)

So, keep your spending tight and on schedule with credit card statement due dates, and you’ll take advantage of the credit card. Tell us what you do to take advantage of your credit card, so you’re not dinged!





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