Benefits Of A Business Credit Card

posted Sep 11, 2012, 6:24 AM by Lou Peppe   [ updated Sep 18, 2012, 4:53 AM ]

Do you have a credit card that you use solely for your business?  Business credit cards have names like “Small Business” or “Professional” to distinguish them from personal credit cards.  If you use your business credit cards smartly, by charging only business expenses on them and paying them off in full each month, you can reap the benefits of using them without getting stuck with the disadvantages.  Advantages of using a business credit card include:

1.    Keep track of all your business expenses.

The easiest way to miss out on deductible expenses is to pay for things with cash.  If you use a credit card you get a statement of all your expenses that you can reconcile each month.  If you lose a receipt for a credit card purchase it’s not the end of the world.  You’ll still pick up the expense from the monthly statement.  If you lose a receipt for cash you miss out on the deduction. The $20 or so you spend on paper and printer ink each time you go to Staples can add up to real money by the end of the year.

2.    Keep your personal and business expenses separate.

Mixing business and personal expenses is the #1 way small businesses get in trouble with the IRS.  The IRS is less likely to allow business deductions if they are co-mingled with your personal expenses.  Further, intermingling business and personal transactions could destroy the “corporate shield” that protects you and your family from the debts and liabilities of the business.

3.    Establish business credit and build a good credit rating

Effectively managing your business credit is just as important as your personal credit reputation.  If your business doesn't have much of a track record financially, it's very unlikely you'll get a loan from a bank.

4.    Earn Points or get cash back on your credit card.

A business credit card can be your ally if you own a small business. Not only do you get a line of credit to meet your business expenses without putting up any collateral, many business credit cards offer a rewards program where you can earn cash back or rewards points on your spending.  Whether it’s earning points that can offset purchases of office supplies, gasoline and hotel stays or cash back on similar purchases; using a credit card can reduce your business expenses and in turn improve your bottom line.