Owning a small business or being self-employed can be tricky when it comes to filing your taxes. Not only do you have to keep track of all your deductions, you also have to separate your personal spending from your business spending, which can get confusing and potentially cost you with overlooked deductions and a lower tax return. Getting a business credit card is an effective way to keep your business expenses separate, while also earning you points and rewards on all your day-to-day business purchases. To determine if a business credit card can help take your business up a notch, first figure out if it’s the right card for you to have.
Should I Get a Business Credit Card?
Business credit cards are not for everyone. Consider getting one if you are in one of these categories:
● Self-employed with frequent travel requirements for work
● Consultants who entertain clients or travel for meetings
● Small business owners and freelancers who have an irregular cash flow and need assistance keeping track of it
● Private practitioners like doctors and dentists
● Independent financial advisors
● People who work in sales and travel frequently for work assignments
● Business owners with high office supply and equipment costs
How to Effectively Use a Business Credit Card
Separate Your Business Expenses
Keeping all your business expenses and deductions in one place is a great way to ensure that you’re getting your maximum deductions when tax season rolls around. Not only that but if you do get audited, your business credit card will consolidate your purchases to help keep all your information in one place.
Build Up Credit for Your Small Business
The opportunity to build credit for your business without potentially damaging your personal credit score is unique to a business credit card, and can really come in handy. If you are looking to apply for a loan, your business line of credit will be open and will determine your interest rate.
It’s important to keep in mind that your credit score guarantees your business credit, so if you are unable to pay, your personal social security number is attached and you’re still liable. Start early and build your credit for longer so you can obtain a lower rate when the time does come.
Make Sure to Take Advantage of the Rewards Categories
Rewards are not business-credit card specific, but they are geared more specifically to business owners. For example, certain cards, like the Chase Ink Business Cash Credit Card, give 5% cashback on purchases at office supply stores and on cellular phone, landline, internet and cable TV services — which is great for freelancers or home offices to write off daily expenses. Other cards will also reimburse out-of-pocket expenses for entertaining clients, travelling, and staying in certain hotels with loyalty programs, as well free Wi-Fi services, and premium roadside assistance packages. Making sure you’re taking advantage of these perks is a great way to get what you need for your business and save some money in the process! Just remember, the rewards don’t counteract they money you’re spending, so spend wisely and make sure you can pay your card off every month.
Make Regular Payments, Even With Irregular Income
Freelancing or running a small business doesn’t always come with the same stability as a typical salaried position. For people who experience irregular cash flow throughout the month, a business credit card can help buy you some time as you’re laying the groundwork and making investments for your business. It’s important to keep in mind, however, that a business credit card is still a credit card, so planning properly can save you tons in late fees and potentially increased interest rates.
The Bottom Line
In conclusion, for self-employed individuals and small business owners, a business credit card can offer a multitude of benefits, from simplifying expense tracking to earning rewards on business purchases. By effectively utilizing a business credit card, entrepreneurs can separate personal and business expenses, build credit for their businesses, and take advantage of rewards and perks tailored to their professional needs.
However, it's important to assess whether a business credit card aligns with your specific circumstances and financial goals. Consider factors such as your industry, spending habits, and cash flow variability when determining if a business credit card is the right choice for you. Additionally, be mindful of fees, interest rates, and repayment responsibilities to ensure responsible credit card usage and avoid potential financial pitfalls.
Ultimately, a business credit card can be a valuable tool for managing finances and maximizing benefits for self-employed individuals and small business owners. By understanding how to effectively use a business credit card and evaluating its suitability for your business needs, you can make informed decisions to support the growth and success of your enterprise.
