12/07/2023 · Last update: 30/07/2023

• Financial Advice
• Managing Debt

The Benefits and Risks Of Using A Credit Card For Business Expenses: Is It Worth It?

Introduction: Business Credit Cards – Game Changer Or A Big Risk?

Have you ever stopped to think about the power that little bit of plastic in your wallet holds for your business? Well, listen up! A business credit card isn’t just a fun and sometimes impulsive way to buy shiny things. It’s a nifty financial tool that can help you keep your business’s cash flow in the green, track your outgoings, and rack up few rewards in the process, how good! Picture this: You’ve gone from having your cash flow red to green, you’ve gotten some free business flights curtesy of those reward points and your business credit history has gone from a 2 to a solid 10. All because you leveraged that nifty little piece of plastic! So, what are you waiting for right? Keep reading to get the ins and outs of how you can actually use a business credit card for business expense and find out the pros and the cons so you can be in the know before you take that leap.

The Power of Plastic: Business Credit Cards

Running a business is no piece of cake, and having the right tools in your kit can make all the difference. One tool that’s often overlooked is the good old business credit card. But what exactly is a business credit card, you ask? Well, it’s a bit like your everyday personal credit card, but it’s been given a business twist. It lets businesses, like your own, make purchases and pay them off over time, just like a personal credit card. An added bonus with business credit cards, is that they often come with different rewards compared to personal credit cards.

Using a business credit card is as convenient as a corner shop, as long as you use it for the right reasons! Need to buy new gear? Got a business trip on the horizon? Or maybe you’ve got recurring expenses like software subscriptions? Just whip out your business credit card. It’s as easy as, and it makes tracking your expenses all that much easier. No more rummaging through a mountain of receipts at tax time!

These nifty bits of plastic offer more than just quick and easy work purchases, they also help out in your credit history and rating. Just like your personal credit rating reflects on your borrowing skills and ability, the business credit cards do the exact same for your business. So, when you use your credit card in the RIGHT and SMART way (like pay all your bills on time!) you can build a super strong credit history for your business. Meaning those financing doors will be all that much easier to open in the future. Winning!

So, don’t underestimate the power of that piece of plastic in your wallet. It’s more than just a card; it’s a tool for financial growth and success. It is no different to leveraging the power of credit through other forms like business loans or debt consolidation loans. It all depends on how and why you are using credit.

Cash Flow: The Lifeblood Of Your Business

Cash flow in business is like the mighty Waikato River, it’s got to keep flowing to keep things alive and kicking. It’s the money coming in from your customers or clients and the money going out for expenses. When the cash flows smoothly, your business thrives. But when it dries up, things can get rough. That’s why you have to keep a close eye on your cash flow! It’s always wise to have a bunch of strategies in your pocket, like leveraging business credit cards, to make sure you business stays in the green. It’s all about keeping the river flowing!

Revolving Credit: The Financial Lifeline For Businesses

In the business world, cash flow can sometimes feel like it has two sides of the same coin. Some days, you’re killing it and have all of your ducks in a row, and other days, it feels like you’re chasing your tail trying to keep up. That’s where revolving credit steps up.

Revolving credit is like that mate you can always rely on (as long as you look after him!), always ready to give you a hand when you need it. It’s a type of credit or a type of business loan that works a bit like a safety net. It gives you access to a set amount of funds that you can borrow, pay back, and then borrow again all before any interest is charged! It’s like having a line of credit specifically for your business that you can always leverage. It’s there waiting, ready to jump into action when you need it, and chilling when you don’t.

Using revolving credit, like a business credit card, can be a real game-changer for managing your business’s cash flow. It gives you the flexibility to cover expenses when the coffers are a bit light and pay it back when you’re back in the black.

So, if your cash flow is more of a dribble than a flow, consider revolving credit. It could be the financial lifeline your business needs to keep the ball rolling.

The Pros and Cons Of Using Business Credit Cards

You already know that running a business has its ups and downs, and obviously you always want to make sure that the choices you make for your business are actually GOOD choices! Like absolutely everything in life there is always going to be pros and cons, business credit cards are no different! But if you stay informed, you can make sure your leveraging the pros and avoiding the cons! Let’s take a gander at the good and the not-so-good.

The Pros: Leverage Credit For Business Expenses

 

1. Flexibility: Business credit cards give you the wiggle room to cover expenses when cash flow is a bit thin. Remember, it’s like having a safety net that’s there when you need it. Though you don’t want to rely upon it too much!
2. Rewards: Lots of business credit cards offer rewards programs. You could be racking up points for flights, cash back, or other goodies just for spending on business expenses. Which feeds back into building your cash flow – it’s a win win, right?
3. Building Credit: Using a business credit card responsibly can help build your business’s credit history. This can open doors to more and easier financing options down the track. This is super handy if you are looking at expanding and growing your business.

The Cons: Relying On Credit Can Be Risky!

 

1. Interest Rates: Business credit cards often come with higher interest rates than other types of loans. If you’re not careful, the interest can stack up faster than a game of Jenga. Easiest way to do this is pay off all bills before the interest free periods end, direct debits can streamline this so you don’t forget! Having a day of the month that you pay all your invoices and bills can also be super handy!
2. Overspending: Credit cards can being tempting for some and having access to one can lead to overspending. It’s important to keep a close eye on your expenses and stick to your budget. Remember, it’s not “your” money and you will always have to pay it back!
3. Impact on Credit: If you miss payments or max out your credit card, it can put a dent in your business’s credit history. Which obviously isn’t a great move! Especially if you’re looking to get more finance in the future.

It is super important to note that if you know that in the past you have struggled with paying bills on time and having discipline with your spending, whether that be personal or business related, you really should avoid using credit cards all together! The last thing that you want is to create a toxic and never ending cycle of over spending and failing to make payments. Which at the end of the day not only negatively influences your cash flow, but also your over quality of life! Because you’re going to be either extremely stressed or in absolute denial about your spending habits. Either way, its not a good situation to put yourself or your business in! If you’re on the fence and not sure what to do, sit back and take an honest reflection of your spending habits and discipline in the past. If you can see a reoccurring pattern of overdue bills and impulsive purchases that you regret, well, credit cards are likely to be more detrimental than beneficial to you! And if you already have a bunch of maxed out credit cards from those impulsive habits, putting all of your eggs into one basket and managing one loan can be much more easier to manage. Our debt consolidation loans can become your best friend and are super easy to apply for.

Conclusion: Finding The Balance With Business Credit Cards

Using a business credit card is a bit like walking a tightrope. On one side, you’ve got the potential benefits: flexibility, rewards, and building credit. If used right, are all epic! On the other side, you’ve got the risks: high interest rates, overspending, and potential damage to your credit history.

The key to successfully walking this tightrope is balance. It’s about using your business credit card as a tool, not a crutch. Remember your leveraging “other peoples money” to increase your cash flow and possibly grow, always remember to respect that! Make clever decisions, pay your bills on time and watch your finances! At the end of the day business credit cards can be a phenomenal way to push your business to the next level if leveraged in the right way! If you’re looking for other options outside of credit cards, we have a massive range of helpful loans for bother personal and business needs. They are streamlined and easy to apply for so you don’t have to mess around to make those purchases.