Which one to use, a business credit card or a personal credit card, to improve bad credit? Without sound information, this can be a hard pick as they have similar morphology, and most of the small business credit cards have the same loyalty programs for dedicated users same as personal credit cards. But the main difference between the two is that the Credit Card Act of 2009 applies to business credit cards. In simpler terms, there is no fixed interest rate on a business credit card; it keeps on fluctuating depending on the market rate. On the contrary, the interest rate on a personal credit card can increase to a certain level, after that it stabilizes.
One of the main reasons to use a business credit card is to improve your credit score. You can do that by trying your best to limit the credit card use. If due to any reason a borrower fails to make the repayment on time, the late payment can put a bruise on your credit score. So, carefully select the most compatible business credit card and to recover from a bad credit score, you should read what experts have to say about these credit cards.
- Watch the expenses
Henrique Dubugras is the CEO of Brex, and he says that small business, especially, a startup has to monitor its expenses, in order to take full benefit from a business credit card. He said he is determined to help businesses, his company’s credit card has no annual fee. In addition to this, the rewards program is well-organized, and the company offers seven times more rewards as compared to the conventional one. Along with corporate or business credit cards, his company offers “expense management features and integrations into accounting software.” With the help of technology and software, the borrower can keep track of the financial health and will lower utilization rate; the credit score will definitely increase.
- Separate your personal expenses from business expenses
Regardless of the size of small business expenses, the business-related expenses should go where it belongs. John DiScala, founder and CEO of Johnny Jet, shares his wisdom saying, “If you want to save time and money in the long term, you shouldn’t put your business credit card spending on your personal credit card.”
He further gave reasons from his statement. One being, different credit card for business and personal expenses will help you maintain an account book. Keeping a track on where the money is going. Moreover, if you have applied for a loan, it is easier to track the loan payments on a business credit card.
- Redeem those points
In addition to the above-mentioned tip, John DiScala points out another significant plus point of using a business credit card to its fullest. He said, “If you aren’t earning bonus points (at least one-and-a-half points per dollar spent) on your most common purchases, you need to look for a new card that will.” It is recommended to find the business credit card that supports the purchases of your business. Multiple business credit cards have deals, for example, if you spend $150,000 from the Chase Ink Business Preferred on internet, advertising, or social media, then you will earn three points on each dollar. So, be aware of these rewards and don’t forget to take benefit from them.
- Always have a plan
Actions that are not planned or made without thinking about consequences have a tendency to fire back. The CEO of Fundera, Jared Hechet, mentioned “spending without a plan” as one of the many mistakes business credit card users make! He advises devising a strategic funding plan before you start to drain the credit by making unnecessary purchases. You can’t keep on buying expensive art with a high limit business credit card in one hand. Plan a budget and don’t fall prey to money. Startups need to be more vigilant about it. At the end of the day, you have to make sure that you are able to make the payments.
- Always follow the repayment schedule
Another tip by the financial expert, CEO of Fundera is to be aware of “getting behind on payment.” The main reason behind a concrete spending plan is to never fail to make a payment on time. Jared suggests to “Take the time to create a budget and a cash flow forecast, add payment reminders to your calendar, and if you’re working with a team, make it clear who is responsible for making payments on time, every time.” So, the next task on your agenda should be to get software that can help you make automatic payments. Clearing off debt on time is one of the easiest ways to improve your bad credit score.
- Manage and liberate your employees at the same time
Antia Campbell, the founder, publisher, and CEO of Small Business Trends says “an employee business credit card allows you to delegate yet control employee spending.” Good delegation is one of the reasons behind a successful business. An employee business credit card helps you build a rapport with your employees and you can easily manage the spending limit if your workforce as well. In addition to this, you can earn more points.
- Explore all of your options
Brandy Hadley, an assistant professor of finance, advises to “compare business credit card characteristics. Due to the rise of the small businesses, multiple small banks and lending institutions are offering a small business credit card. So, it is essential to make a wise pick! Analyze the interest rate, payment terms, APR, and various other factors before selecting a business credit card.
- Longer terms are better terms
The editor at Fit Small Business, Evan Traver, advises “use a business credit card with longer repayment terms.” It is important to pay heed to the payment terms of the credit card. The longer the terms, the less money you have to pay each time. So, make sure the lender is offering you flexible terms!
- Scan through your credit needs
Denise Beeson, the president at DeniseBeeson.com, talks about “determining you credit needs before you apply.” She emphasized her point by giving a similar example like this one, you run a restaurant and offer food delivery service as well, so apply for a small business credit card with which you can track your driver’s route and truck’s mileage. This will help you in managing the money. Plus, you will have an idea about your financial standing.
- You can negotiate the terms, did you know that?
When talking about tips and tricks to use a small business credit card, Travis Moore gave away a negotiation hack. Most of the credit card users are unaware of the fact that they can contact customer’s services and discuss credit terms, interest rate, and APR. All you need to remember is ‘being nice pays well,’ and you have all the control!
So, the next time you are on your way to shop for a Business Credit Card, keep these tips in mind. The goal is to use the credit card to improve your financial position. For more information about small business credit cards and other funding options, head over to our website. Moreover, for tips and tricks follow us on Twitter (@Onlinecheck) and Facebook (@Onlinecheck). If you have any question, feel free to call us on our toll-free number at (833) 827-4412, our loyal and keen financial advisor will answer your every question and guide you throughout the way.