5 Smart Credit Card Tips
 By Lee S. Shaffer

Small-business lending is in the tank. Even businesses with superior credit can’t seem to get the money they need from traditional lending sources.

Enter small-business credit cards. More and more owners are turning to them to help manage the cash flow of their businesses. And credit cards can be a wise choice if used correctly.

Robert C. Seiwert, senior vice president of the American Bankers Association and a former commercial banker, offers these five tips for selecting and using small-business credit cards.

1. Select a business credit card that fits your firm’s needs.
Some cards feature discounts on certain purchases or award points for certain airlines and hotels, but these rewards may come at a price in the form of higher interest rates or annual fees. Make sure that the benefits of the card outweigh the costs to your firm.

2. Evaluate the rates, terms and fees of competing cards.
Start by asking these questions:

• Can the introductory rate be increased? If yes, when, and to what interest rate?
• What is the effective interest rate (APR) on outstanding balances?
• How are finance charges calculated?
• What fees are charged?
• Under what conditions can the card issuer change the amount of credit available, raise the interest rate or terminate the card?
• What am I obligated to pay if my business credit card is lost, stolen or used by an unauthorized person?
• What is the grace period before interest is charged on any outstanding balance?
• Does the credit card allow my firm the capability to establish sub accounts so I can track business expenses by category?

3. Small-business credit cards are primarily designed to help your firm manage its cash flow.
They should not be used as a source of equity capital. Don’t use credit cards to fund intermediate and long-term expenditures.

Appropriate uses for small-business credit cards include:

• Building a business credit history
• Taking advantage of various rewards and discount programs offered by credit card companies to lower the overall cost of key expenses, such as travel expenses
• Controlling and tracking employee expense accounts
• Taking advantage of the interest-free grace period that occurs between the time a charge is made on your credit card and the time payment is due

4. Pay your credit card bill on time.
Borrowers who use debt wisely and pay it back on time receive the best terms from their financial service providers because they represent a lower credit risk.

5. Operate within your credit card limit.
Don’t assume that the bank will honor credit requests that are in excess of your established credit line.

If you need more credit, ask your banker in advance of your need for these additional funds. Your banker may have alternative ways to fund your needed expenditures that are better for your business than using your credit card.

Get Credit Card Answers
The small-business consultants at ProTalk can help you decide which credit card offers might be right for you. AFS Members have unlimited access to the consultants—and they’re just a phone call or keystroke away.

Ask the ProTalk consultants about:

• Choosing the right credit card for your business
• Providing cards to key employees
• How to get your credit line increased
• And much more

(Posted September 2010)

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