Don't Pay for These 4 Expenses With Your Business Credit Card
KEY POINTS
- Your personal spending belongs on your personal credit card -- you'll probably get better perks and rewards from that anyway.
- If you need to rely on credit to cover payroll and rent, you may be overextended.
- Only use a credit card for a big purchase if you have the cash ready or are using an intro APR offer.
All kinds of businesses can benefit from a credit card. Business credit cards can streamline your spending and make tax season a lot easier, plus many come with perks that can save you time and money.
These can include purchase protection, reimbursement for trusted traveler programs, and bonus rewards on spending for marketing, internet service, and trips to the office supply store.
Despite these great features, a business credit card isn't right for all your spending. Here are a few times you should skip the credit card and use a different form of payment instead.
1. Your personal spending
First and foremost, a business credit card isn't to be used to cover your own spending. It's solely for your business expenses. If you want to buy new clothes, get a new personal computer, or take a vacation that isn't work-related, use your personal credit card.
Consumer credit cards have rewards programs that are much more geared toward the kinds of purchases you make in your everyday life. And one of the reasons to get a business credit card in the first place is to keep your personal and company spending separated.
2. A large purchase -- sometimes
A credit card can be an excellent way to make a large purchase, under certain circumstances. Here are those circumstances:
Why a Business Credit Card Could Transform Your Small Business
These business credit cards that offer a convenient and efficient way to separate personal and business expenses, simplifying accounting and tax reporting.
Additionally, business cards can provide valuable perks such as rewards points, cashback, and expense tracking tools, enhancing financial management and the potential to help save money in the long run.
Offer | Our Rating | Welcome Offer | Rewards Program | APR |
---|---|---|---|---|
Ink Business Unlimited® Credit Card
Apply Now for Ink Business Unlimited® Credit Card
On Chase's Secure Website. |
Rating image, 4.50 out of 5 stars.
4.50/5
Our ratings are based on a 5 star scale.
5 stars equals Best.
4 stars equals Excellent.
3 stars equals Good.
2 stars equals Fair.
1 star equals Poor.
We want your money to work harder for you. Which is why our ratings are biased toward offers that deliver versatility while cutting out-of-pocket costs.
= Best = Excellent = Good = Fair = Poor |
Earn $750 bonus cash back Earn $750 bonus cash back after you spend $6,000 on purchases in the first 3 months from account opening. | Earn unlimited 1.5% cash back on every purchase Earn unlimited 1.5% cash back on every purchase made for your business |
Intro: 0% Intro APR on Purchases Purchases: 0% Intro APR on Purchases, 12 months Balance Transfers: N/A Regular: 18.49% - 24.49% Variable |
Ink Business Cash® Credit Card
Apply Now for Ink Business Cash® Credit Card
On Chase's Secure Website. |
Rating image, 4.50 out of 5 stars.
4.50/5
Our ratings are based on a 5 star scale.
5 stars equals Best.
4 stars equals Excellent.
3 stars equals Good.
2 stars equals Fair.
1 star equals Poor.
We want your money to work harder for you. Which is why our ratings are biased toward offers that deliver versatility while cutting out-of-pocket costs.
= Best = Excellent = Good = Fair = Poor |
Earn up to $750 bonus cash back Earn $350 when you spend $3,000 on purchases in the first three months and an additional $400 when you spend $6,000 on purchases in the first six months after account opening. | Earn 5% cash back in select business categories Earn 5% cash back on the first $25,000 spent in combined purchases at office supply stores and on internet, cable and phone services each account anniversary year. Earn 2% cash back on the first $25,000 spent in combined purchases at gas stations and restaurants each account anniversary year. Earn 1% cash back on all other card purchases with no limit to the amount you can earn. |
Intro: 0% Intro APR on Purchases Purchases: 0% Intro APR on Purchases, 12 months Balance Transfers: N/A Regular: 18.49% - 24.49% Variable |
- You have the cash saved for the expense and intend to use your credit card to get rewards and purchase protection, then pay the card off immediately.
- You have a 0% intro APR offer and are using it to finance a large purchase over time, paying it off entirely before the intro period is up and your card starts charging its go-to rate (which could be 18%, 20%, or more).
If you don't fit either circumstance, I caution you against using a business credit card to make a large purchase, unless you truly have no other options.
A better choice for a large necessary purchase you can't afford outright (such as equipment for your business) is a small business loan. It's likely to come with a lower interest rate and more favorable payment terms than a credit card, like set monthly payments and a fixed payoff date.
3. Payroll
If you have staff working for you, you might wonder if it's okay to pay them using your business credit card. This isn't a great idea, for a few reasons. For one, your credit card's terms and conditions may not allow you to cover payroll with the card.
And if you're in a situation where you can't afford to pay your employees otherwise, it's worth taking a closer look at your books and making sure you're not overextended. Your staff works hard and they deserve to be paid -- and if you can't actually afford to do so without relying on credit, you may need to make some cuts somewhere.
4. Your mortgage or rent
It's not super likely that you'd be able to charge your business's rent or mortgage payment on a credit card anyway. But if you're given the option, this is best avoided.
For one thing, you'll likely be charged a processing fee to use a credit card for a rent or mortgage payment, if they're accepted -- that could be 2% to 3%, making your rent cost that much extra. And even if your credit card pays that high of a percentage as rewards, you're only breaking even. And now you have a potentially larger problem: paying off the credit card and avoiding interest charges.
Honestly, you shouldn't need to pay for the space that houses your small business with a credit card. If you don't have the money on hand in your business checking account and need to use a card to cover this cost, it's worth considering whether you're getting in over your head with your business expenses vs. income.
Ready to get a new credit card for your small business? I applaud this move. Just don't use it for any of the expenses above.
Our Research Expert
We're firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers. The Ascent, a Motley Fool service, does not cover all offers on the market. The Ascent has a dedicated team of editors and analysts focused on personal finance, and they follow the same set of publishing standards and editorial integrity while maintaining professional separation from the analysts and editors on other Motley Fool brands.
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