Credit cards are a good way to manage the expenses that come with running a company.
They are convenient to use and much easier to track then using cash. Each month you need only look at your statement to see how much your company spent on petrol, supplies, business lunches, and any of the other common costs of maintaining the store. However, it is important that you consider whether or not it is a wise choice to use your personal plastic for those company costs. While you might think it is simply easier to only have one card for both your personal and work expenses, it is usually not a good choice.
Benefits of having a Business Credit Card
Reduced risk to your personal finances
Even though you are the owner of a company, you do not have to take on all of the personal financial risks of that company. If you have plastic that is in the name of your company instead of yourself then the company is ultimately responsible for the debt. Should your company fail, your personal credit standing will not be affected. By the same token, if you use a personal card for business purchases then you will have less access to cash. That could mean, you will not be able to make personal expenditures when you need to do so. It could also increase your debt to income ratio which may preclude you from getting new cards or cause your issuer to increase your interest rate.
It keeps your finances in order
You could spend a lot of time trying to figure out which expenses were personal and which were for work, but there is always the potential for error. When that happens, you could wind up claiming expenses on your company taxes that were actually personal or leaving expenses off that were work related. If you have a completely separate account, you never have to worry that your finances will get mixed up. You simply have one for yourself and one for the company.
You get all of your rewards
Even if you have an excellent rewards scheme on your personal plastic, it might not be valid if you are using it for company costs. One obvious situation is travel insurance. If you were to book a business trip on your personal card, you would probably not be able to take advantage of the travel insurance. Most of the time if it is issued from a personal card, it is stipulated that it cannot be used for company travel.
Getting a company credit card is ideal for loads of reasons, the ones listed here are just the tip of the iceberg. There are other benefits too, like the ease of managing money so that you do not need a cash box or a full time bookkeeper. You will also be able to have cards made for your employees that have special restrictions which give you ultimate control over their spending too.Back to top