Credit card debt is a slippery slope, and managing it well becomes even more important when it comes to a business credit card. If you run a business, you must already be familiar with the perks of business credit cards. Business-oriented reward points, followed by slightly lower rates than average personal credit cards, make business credit cards even more alluring. But before you go out and make purchases on your credit card, there are some transactions you should know about that should never be made on your business credit cards. These can lower your credit scores, change your credit lines, and in some cases, reflect poorly on your personal credit history.
Personal Expenses
This is what not to spend on a business credit card 101. Never use your business credit card for your personal expenses. It is not illegal to put your personal expenses on business cards, but it would be a headache for the accountant when doing the taxes. This could also lead to a violation of company policy and can reflect poorly on your business and personal credit history. So, think twice before merging your personal with your business.
High-Value Purchase
Business credit cards usually have a higher limit, tempting consumers to make a high-value purchase. But experts say you shouldn’t be doing that in any scenario. A round-figure interests’ rate of 14% might seem cheaper than a personal credit card interest rate, but it is still higher than what you would incur on a personal loan.
If you run a small business, it can wipe out your credit history, deterring potential investors from investing in your industry.
Legal Entanglement
It is entirely normal for you to charge your legal consultant on your business credit card. Although, if you are tied up in litigation, it is not best to assess all the legal fees on your business credit card. Ask yourself a simple question: Would you want to invest in a company tied up in legal disputes and charge all the litigation fees on their credit card?
Cash Advances
Credit cards usually come with a cash advance feature which allows you to withdraw cash on your credit card. But just because you have the option doesn’t mean you should use it. The charges on the cash advance are very high, and there is no interest-free period associated with it. This means the moment you withdraw the cash; you already owe more than you took.
Payroll
Earlier, we discussed why you should avoid significant expenses on your business credit card, and payroll is a considerable recurring expense that you would want to avoid charging on your business plastic. For a small and medium business, payroll is its most significant expense. If you have no other options, make sure you at least have a balance transfer credit card that buys you some more time to pay off the interest rate.
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