Many small business owners use credit cards, whether business or personal, to keep their business running.
Not using these cards wisely, though, can cause financial trouble for both the business and the business owner, according to Derby Cox, who covered the topic in a recent posting on the SmartBlog on Finance.
“Credit cards are convenient and often easier to get than other types of bank financing, and when used correctly, they are an effective tool,” Cox wrote. “But some common mistakes could land you and your company in financial hot water.”
Cox shared the following three mistakes to avoid.
1. Not doing your research. “Read the fine print before signing up for a small-business credit card,” Cox wrote. “Incredible introductory offers have to end some time, and when they do, you don’t want to be stuck with a card with exorbitant interest rates and high yearly fees.”
2. Not understanding the rules of business credit cards. “As long as you use your small-business credit card only for business expenses, your personal score will be protected if your company goes south, right?” Cox wrote. “Unfortunately, the answer is often, ‘No.’ Bottom line: You could be on the hook, so make sure you charge responsibly with your credit card.”
3. Paying the minimum. “Try to pay more than the minimum amount due on your cards,” Cox wrote. “Making minimum payments might leave you with more cash at the time, but you will rack up costly interest fees. This rule may be especially true for small-business credit cards, on which cardholders tend to carry larger balances.”
To read the complete SmartBlog on Finance post, click here.