The way that you use credit cards to make purchases on behalf of your small business can have a big impact on your long-term financial outlook. Here are some smart credit card management practices that can help you strengthen your business’ credit score, avoid budgetary hardships, and get good rewards for your spending.
Make Timely Payments
Small businesses that pay their credit account charges past the due date may see a corollary decrease in their credit score. Getting behind in payments or allowing accounts to fall into delinquency status is invariably going to undermine your goals to build up creditworthiness.
Pay your monthly credit card bills on time every month to avoid any blowback on your score and negative remarks on your report. Being in the habit of making timely payments consistently over an extended length of time is exactly what prospective creditors want to see reflected in your score. Consistent payments could also spare you from having to contend with late fees or lowered credit limits.
Maintain a Formidable Credit Utilization Ratio
Small businesses really should avoid putting too many of their operating expenses onto credit balances. They’ll accumulate interest if they stay sitting on a charge account for too long, and it can drive credit utilization up too high.
Using too much of the available balance on either individual accounts or your total available credit from all your accounts will weigh down a business credit score. Try to keep your total utilization under thirty percent.
To achieve a healthy utilization ratio, it may be advantageous to request an increase in your credit limit. Rather than using the additional sum, just leave it untouched where it is. That will allow you to use less of your available credit without spending less than you are now.
Avoid Carrying Large Balances Forward
Many small business owners make timely payments on cards every month and continue carrying the same balance around. Standstill balances may be partly attributable to ongoing spending, but high-interest rates may be the real issue.
Don’t charge purchases unless you’re confident about being able to pay for them in their entirety within one fiscal quarter. Otherwise, you’ll wind up having to spend a lot on interest and you won’t have as much operating capital to afford new expenses.
Lastly, remember to be discerning about credit card rewards programs. Make sure you understand the rewards program’s terms and conditions so you can take full advantage of the program’s best benefits.
