As a small business owner, you may require funds to meet your short-term capital requirements. You may have to rely on your friends or financial institutions to take a loan. At times, you may not be able to get a loan to manage your finances. In such cases, you can get a credit card to finance your small businesses. However, it should not be treated any differently from a regular loan. You will have to assess your repayment ability and keep your balance in check.
Through credit cards, you can access smaller amounts of cash when you need them, allowing you to keep your balances positive. Based on your repayment capacity, the bank assigns you a credit limit that you can use to pay your vendors or make necessary purchases for your businesses.
Perks Of Using a Credit Card For Your Business
Business credit cards come with a host of benefits that you can avail of in your business. Here are the benefits of using a credit card to manage your finances during a cash crunch.
Reduce the cost of capital
Generally, the interest rates range from 10% to 30% per annum. Based on other financing options, it is less expensive than some other alternative lenders and loans. It is worth noting that you will have to bear charges if you pay your credit card bill on time and in full. You will have to incur interest charges on cash advances and balance transfers, which you can avoid with proper budgeting and planning.
Business credit cards come with introductory 0% APR periods that are usually between 6 and 12 months. During this period, you will not have to bear any interest in purchases. As a small business owner, you can use this opportunity to grow your business before you have to start paying for your expenses.
No introductory balance transfer fees
Besides the 0% APR period, you can also avail yourself of balance transfers at zero cost. If you wish to transfer your balance during the introductory period, you will not have to incur any fees. It means that you can transfer the balance of your high-interest credit card to a no-interest card.
Rewards and bonuses
Most business credit cards in India offer reward points, cashback, and sign-up or welcome bonuses. The sign-up bonus is either in cash or in reward points. Your issuing bank may offer you maximum reward points if you spend a certain amount within the first six months of owning the credit card.
This benefit is offered after the introductory period is over. You can get cash back and reward points depending on the amount of money you spend using your card. For instance, you can get up to 5 reward points for every Rs. 150 transaction.
Revolving credit card
The best thing about small business credit cards is that they are reusable revolving credits. It means that you can use your credit card up to your approved credit limit, paying your balance down or pay it off completely, and use the credit limit again. It does not require you to reapply every time you need access to more funds. You will need to pay down the minimum portion of your balance every month. You will need to ensure to pay off your balance in a short amount of time to avoid high costs.
Track your business-related expenses easily
Another benefit of using a small business credit card is that you can track your business-related expenses conveniently. You can use your credit card statements and set account alerts to track your expenses. Furthermore, some business credit cards come with accounting software programs to assist you in bookkeeping.
A Few Things To Be Mindful Of While Using Your Business Credit Card
- When applying for a credit card, make sure to negotiate for better terms if you have maintained a healthy credit score.
- Make sure to pay your credit card bill on time and in full to avoid hefty interest charges. Before purchasing anything, you have to make sure that you can pay the balance without any delays.
- If you miss one payment, make sure that you do not make it a habit, as it will only increase the cost of borrowing.
- If you are satisfied with your current credit card, look for better deals in the market, and get a card that comes with a host of features and benefits.
- Do not trust your instincts when using a credit card. Make sure to work with real-time data to track your credit card usage over time.
- Communicate changes in your financial situation with your credit card issuer. In financially challenging times, you can negotiate to lower the cost of using your credit card to pay for your expenses.