General Business and Finance Blog

The recession’s impact on personal credit cards has been well documented over the past few months – in fact the responsibility for the ‘credit crunch’ has been squarely laid at the feet of inappropriate credit lending by the banks. Many people are receiving letters from their credit card lenders informing them of an increase in interest rates as the lenders try to recoup some of the substantial losses incurred as the financial crisis deepens, but what effect has the general fiscal malaise had on business credit cards?
The economy still needs to operate to fight off the worsening financial picture, and businesses (particularly small businesses) will still need lines of credit. With the Bank of England base interest rate at a record low, business leaders are now calling on the government to cap interest rate charges on business credit cards to give them a little bit of breathing space. The government has consistently resisted the calls on the grounds that a cap could harm the consumers they are designed to protect by restricting access to credit and also reducing the transparency of charging structures.
Credit cards – particularly for small businesses – are an additional form of financial income, allowing short-term flexibility and playing a vital role in keeping other lines of credit open to a business. Using a business credit card can enable a small business to ensure that suppliers are paid on time whilst giving the business an interest-free period in which to bring in sufficient funds to pay off the credit card debt. Although this may sound like a case of robbing Peter to pay Paul, this financial juggling act is what keeps many businesses trading and can avoid them having to take out costly loans or charge-laden overdrafts. But as the recession really begins to bite, businesses may find that obtaining a business credit card in the first place becomes far more difficult.
The worst thing a budding entrepreneur can do is to use their own personal credit card to finance their business. This makes it very difficult to separate business and personal finances and makes the businessman personally responsible for the debt. Business credit cards also have similar offers to personal credit cards, including interest-free periods, balance transfer facilities and often additional perks as well. This makes them ideal for short term, small credit payments and for larger businesses it enables a number of employees to use the same facility through multiple card access. As the full effects of the recession begin to be felt, business credit card users may see some of these perks start to disappear as card issuers attempt to cut the costs of their cards and reduce their exposure to potential bad debt.
Some businesses are using business credit cards to pay their tax bill, which is tempting as it avoids any fines for late payment. However, HMRC has become more flexible as the recession showed that many businesses were struggling with their tax bills, and have introduced a deferred payment scheme. Before putting the tax bill on a business credit card it may be worth investigating this option first rather than incurring interest charges on the amount via the credit card.
As financial belts tighten, business credit cards may start to become more of a luxury rather than a necessity for many businesses. Although there are still plenty of opportunities for small businesses with a good credit record to take advantage of business credit cards, lenders will invariably be stricter in their acceptance criteria than during the credit boom of the eighties and nineties. Before applying for any form of credit it would be wise to take the time first to ensure that you meet all the requirements for acceptance, as repeated refusals will damage your credit rating further. Credit needs to be used wisely, and careful management of a business credit card is still a good option for small and medium size businesses that want an additional line of funding available to them for everyday use.

Money is not everything. There are travelers’ checks, money orders, and credit cards. When you start your own business, there’s a way for you to obtain much-needed capital, too. This way is called small business financing credit card.
Small business financing credit card, also known as small business starter credit cards, is a great way to keep your personal and business finances separate. Personal Credit Card Versus Small Business Financing Credit Card
In the past and even at present, lots of entrepreneurs rely on their personal credit to get their business up and running. The problem with this is that they carry the debt from their business into their personal credit cards. Ultimately, they end up hurting their personal credit scores.
This is where small business financing credit cards come in. They offer higher credit limit. Additionally, they keep business and personal expense separate, thereby making it painless to track tax deductions. More importantly, you may write off your small business financing credit card’s finance charges and annual fees. Why Get a Small Business Financing Credit Card1. Build Credit
A small business financing credit card is a good way to build a financial history. Your business is a start-up; it’s unknown. This makes it difficult for your business to obtain loans. A small business financing credit card will remedy this. It will provide banks with the spending footprints they need to reassure themselves you’re a responsible borrower.2. Avoid Intermingling
When it comes to managing your expense, there’s one thing you should always do. Segregate, segregate, segregate. Do not mix business and personal transactions. This might later on create tax and money management problems. 3. Prevent Shoebox Accounting
It is always a nightmare to track business expenditures. With a small business financing credit card, however, you can turn the nightmare into one you can easily snap out of. Your credit card company will provide you with a year-end statement where you can find your transactions summarized, itemized, and categorized. With such a report available, there’s no need to keep a shoebox stacked with receipts. 4. Special Rewards
The credit card industry is so competitive providers fall over themselves to lure borrowers. Accordingly, a reward and discount program for small business credit card users was developed. Every time you use your small business financing credit card, you qualify for discounts and rewards, ranging from office supplies and plane tickets to phone services. How to Manage Your Small Business Financing Credit Card Effectively
Credit cards, whether personal or corporate, will always be open to potential abuse. Effectively manage your small business financing credit card by:1. Limiting card hopping
Sure, you qualify for multiple cards, but this does not mean you should sign up. You shouldn’t. This will only tempt you to overspend. It will hurt your credit rating, too.2. Steering clear of cash advances
Never use this credit card feature unless you need to bail yourself out of jail. It comes with whooping credit card fees and interest costs.3. Avoiding late payments
The more delinquent your payments are, the higher the fees and interest rates you would be saddled with. Moreover, late payments hurt your credit reputation.4. Using grace
Many companies offer a 21-day grace period to clients before asking them to pay for purchases. Turn this to your advantage by drawing up a schedule of your purchases and payments.
Use your small business financing credit card prudently. Remember, credit cards should be a financial safety net, not a trap.