Business credit cards are often advertised as great tools in managing small businesses. Today, more many entrepreneurs opt to get a business credit card and are optimistic about the benefits these cards can bring for their business. Although it is true that using credit cards for business have advantages, you should also be aware of the possible dangers that await those who misuse these business tools.
In this article, we’ll talk about the snares that are associated with the incorrect use of business credit cards. Being aware of these dangers does not mean to discourage business owners from using business credit cards. On the contrary, it aims to help business owners to use their business credit cards more effectively.
Business Credit Cards- The Snares to Avoid
Overspending. Business owners are not the only ones who are warned against this snare. Even personal credit card holders can easily fall victim to this trap. Because credit cards are so easy to use, it is too tempting to use them carelessly, without considering the consequence it could bring.
If you’re a business owner, see to it that your business credit card is only used for official business expenses. Some entrepreneurs make the mistake of charging even their personal expenses to their business credit card. For instance, if you’re dining out with your family or friends, or buying some groceries, you may be tempted to charge these bills to your business credit card. But such a habit poses a great risk.
Before you’ll know it, you may have already incurred huge bills in your business account. You could have a difficult time paying off those charges in full and you may be forced to carry over your balance instead. Sooner or later, this habit can cause you serious debt problems.
Maximizing your business credit. Another risk that you must be aware of is the tendency to use your credit limit to the fullest. Experts recommend not using more than 30% to 40% of your credit limit to avoid the risk of bad debt.
However, some entrepreneurs bravely max out on their credit cards especially when starting up the business, without realizing that they have already fallen into the debt trap. It isn’t realistic to expect that the business would be profitable within the first few months. Most successful businesses needed to wait at least three months before getting profits.
During the initial stage, you may find it impossible to pay off the charges on your business credit card. And because you’ve already maxed out on your credit limit, it wouldn’t be possible to use your card for new purchases. Aside from this you’ll automatically be charged with the interest rate from month to month plus possible penalty charges for exceeding your credit limit.
Such a move can also have a negative effect on their credit history. If your credit history shows that you often use your credit limit in full, lenders could have a negative impression about your company. On the other hand, leaving at least 50% of your credit limit free makes you an ideal candidate for lenders.
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Thursday, October 29, 2009
Friday, October 16, 2009
Possible Disadvantages of Contractors Business Credit Cards
Construction Business grows bigger nowadays but applying a contractors' business credit Card really a good choice? First, consider the possible drawbacks of owning this type of credit card.
Credit card companies know the potential of business credit card clients. This is why they come up with more specific and better features that are especially created to meet different types of businesses. For instance, the group small constructors and construction companies is a niche market with great potential.
To attract contractors and business construction owners, credit card companies offer specific features that are designed to meet their spending style and needs. According to recent surveys in the credit card industry, most businesses spend only less than 5% on their business credit cards. Thus, credit card issuers are currently introducing offers to entice business credit card holders to use their cards more often.
One example is the Chase Contractor Visa Business credit card. This card offers promotional financial and a attractive reward package for those who will spend at least $1,000 or more on their construction material purchases. This card also doesn’t have a pre-determined spending limit so its holders can use it for as much purchases as they need.
If you’re a contractor or is in the construction business, taking a look at business credit cards for contractors are definitely worth considering. Nevertheless, here are the possible drawbacks that you should be aware of.
Possible Drawbacks of Contractors’ Credit Cards
It’s important to remember that each business credit card has its own set of rules and conditions that you need to know. The same thing applies to business credit cards with rewards programs for contractors. If you’re not clear about the rules, you may find yourself stuck with a card that doesn’t reward you at all.
What types of purchases are eligible to earn you points? You need to be very sure about the exact type of purchases or from which merchants you should purchase from in order to earn points. Otherwise, you could be using your business credit card in the wrong way. Even if you charge your purchases to your credit card, if those purchases do not count, you won’t be earning points at all.
Is there a limit to the amount or value of reward points your can earn? Some credit cards would only allow you to earn a maximum number of points each month. The Chase Contractor Visa Business credit card has a limit of 20,000 points per month which means you can’t exceed the 20,000 points even if you made more than $20,000 worth of purchases for the whole month.
Does the card impose a pre-determined limit on spending? In case you exceed your credit limit, would this mean you’re disqualified to earn points? Or would you be allowed to earn points for the amount that falls below your credit limit? Is there a penalty fee for exceeding your credit limit?
These are important terms and conditions that you should be clear about before signing up for a contractor’s business credit card. To learn about the exact terms and conditions, you need to take the time to read the contract before filling-out and submitting your credit card application.
Credit card companies know the potential of business credit card clients. This is why they come up with more specific and better features that are especially created to meet different types of businesses. For instance, the group small constructors and construction companies is a niche market with great potential.
To attract contractors and business construction owners, credit card companies offer specific features that are designed to meet their spending style and needs. According to recent surveys in the credit card industry, most businesses spend only less than 5% on their business credit cards. Thus, credit card issuers are currently introducing offers to entice business credit card holders to use their cards more often.
One example is the Chase Contractor Visa Business credit card. This card offers promotional financial and a attractive reward package for those who will spend at least $1,000 or more on their construction material purchases. This card also doesn’t have a pre-determined spending limit so its holders can use it for as much purchases as they need.
If you’re a contractor or is in the construction business, taking a look at business credit cards for contractors are definitely worth considering. Nevertheless, here are the possible drawbacks that you should be aware of.
Possible Drawbacks of Contractors’ Credit Cards
It’s important to remember that each business credit card has its own set of rules and conditions that you need to know. The same thing applies to business credit cards with rewards programs for contractors. If you’re not clear about the rules, you may find yourself stuck with a card that doesn’t reward you at all.
What types of purchases are eligible to earn you points? You need to be very sure about the exact type of purchases or from which merchants you should purchase from in order to earn points. Otherwise, you could be using your business credit card in the wrong way. Even if you charge your purchases to your credit card, if those purchases do not count, you won’t be earning points at all.
Is there a limit to the amount or value of reward points your can earn? Some credit cards would only allow you to earn a maximum number of points each month. The Chase Contractor Visa Business credit card has a limit of 20,000 points per month which means you can’t exceed the 20,000 points even if you made more than $20,000 worth of purchases for the whole month.
Does the card impose a pre-determined limit on spending? In case you exceed your credit limit, would this mean you’re disqualified to earn points? Or would you be allowed to earn points for the amount that falls below your credit limit? Is there a penalty fee for exceeding your credit limit?
These are important terms and conditions that you should be clear about before signing up for a contractor’s business credit card. To learn about the exact terms and conditions, you need to take the time to read the contract before filling-out and submitting your credit card application.
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Monday, October 5, 2009
Possible Drawbacks of a Business Credit Cards
When there's an advantages, surely there's disadvantages too. In this article, we'll discuss the possible disadvantages of credit card misuse and how to avoid them.
Many business owners today are encouraged to apply for a business credit card as one way to finance their business. Experts recommend the use business credit cards as a way to build a separate credit history for your company.
Business credit cards are known for providing business owners an easier way of tracking their expenses, monitoring their employees’ spending, building business credit and enhancing the company’s reputation. But apart from these benefits, there are also drawbacks to using business credit cards that you should know about. What are these disadvantages?
Your Personal Credit History Is at Stake!
It is true that applying for a business credit card is so easy and convenient. You can submit your application online and get approved instantly, especially if you have excellent credit. Nevertheless, you should be aware that when you sign up your business credit card contract, included in it is the personal liability agreement.
Since your personal credit history would be used to approve your credit card application, you are also personally held responsible for all debts that may be acquired in your business credit card account. This means in case of credit problems or if your company fails to keep up with credit card payments, you would be accountable to take over the repayments of all charges.
The personal liability clause implies that all transactions made in your business account can directly affect your personal credit history. This statement is still applicable even if you’ve already applied for a corporate credit. Usually, a business owner wait at least two years before lenders begin to recognize their corporate credit history as separate from their personal credit history. Thus, a single late payment with your business credit card account or your business loan can significantly pull down your own credit score.
With this in mind, you need to be particularly aware of how you use your business credit card and how well you keep up with your repayments. Keep in mind that how you handle your account will also reflect on your personal credit report.
Mismanagement of Your Business Credit
Having a business credit card account gives you the option to distribute extension credit cards or supplementary credit cards to your employees. However, this flexibility comes with the risk of employees abusing or misusing your account for their personal benefits.
Therefore, if you do decide to distribute supplementary cards to your staff, you should only choose a few of your most trusted employees. Add to this, make it a habit to check your monthly billing statements and pay attention to each of the purchases incurred by employees who own a supplementary card. This way, if unnecessary expenses were incurred, you can take appropriate action immediately.
Remember that having a business credit card gives you the chance to either make or break your business credit. If you handle your business credit wisely, you can be assured that you’ll be building a solid and excellent credit history for your company. On the contrary, failing to manage your business credit efficiently can lead to trouble and complications.
Many business owners today are encouraged to apply for a business credit card as one way to finance their business. Experts recommend the use business credit cards as a way to build a separate credit history for your company.
Business credit cards are known for providing business owners an easier way of tracking their expenses, monitoring their employees’ spending, building business credit and enhancing the company’s reputation. But apart from these benefits, there are also drawbacks to using business credit cards that you should know about. What are these disadvantages?
Your Personal Credit History Is at Stake!
It is true that applying for a business credit card is so easy and convenient. You can submit your application online and get approved instantly, especially if you have excellent credit. Nevertheless, you should be aware that when you sign up your business credit card contract, included in it is the personal liability agreement.
Since your personal credit history would be used to approve your credit card application, you are also personally held responsible for all debts that may be acquired in your business credit card account. This means in case of credit problems or if your company fails to keep up with credit card payments, you would be accountable to take over the repayments of all charges.
The personal liability clause implies that all transactions made in your business account can directly affect your personal credit history. This statement is still applicable even if you’ve already applied for a corporate credit. Usually, a business owner wait at least two years before lenders begin to recognize their corporate credit history as separate from their personal credit history. Thus, a single late payment with your business credit card account or your business loan can significantly pull down your own credit score.
With this in mind, you need to be particularly aware of how you use your business credit card and how well you keep up with your repayments. Keep in mind that how you handle your account will also reflect on your personal credit report.
Mismanagement of Your Business Credit
Having a business credit card account gives you the option to distribute extension credit cards or supplementary credit cards to your employees. However, this flexibility comes with the risk of employees abusing or misusing your account for their personal benefits.
Therefore, if you do decide to distribute supplementary cards to your staff, you should only choose a few of your most trusted employees. Add to this, make it a habit to check your monthly billing statements and pay attention to each of the purchases incurred by employees who own a supplementary card. This way, if unnecessary expenses were incurred, you can take appropriate action immediately.
Remember that having a business credit card gives you the chance to either make or break your business credit. If you handle your business credit wisely, you can be assured that you’ll be building a solid and excellent credit history for your company. On the contrary, failing to manage your business credit efficiently can lead to trouble and complications.
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