It may be fun to fantasize about using corporate credit cards to dine in 5-star restaurants and drink bottles of high-end Napa Valley cabernet with no regard for the price on the wine list. But when you own the company, dining out on the company dime looks a lot different. You want corporate spending to be more about controlling costs than running up the corporate card.
There's no reason to despair, though! These tips can help you get a handle on your spending while reaping rewards.
1. Select a corporate card that's right for your business.
Perhaps the biggest decision you'll make is which of the many corporate credit cards out there you'll want to open and use.
There's a host of features and benefits, and it's vital to understand that not all credit cards work the same way. Some require the balance to be paid in full each month. Some offer 30-day terms. Some offer longer terms. A number of corporate credit cards provide rewards for purchases.
Review your options and select the card that makes the most sense for your company.
2. Get the most out of your rewards.
When used wisely, corporate credit card rewards can add up... Add up to cash back, free flights and free hotel rooms, that is.
The trick is to understand how your rewards plan works. Some cards offer higher percentages of cash back for purchases in certain categories, like office supplies, travel or fuel. Most rewards cards also have fantastic introductory benefits, but you have to understand how to obtain those benefits.
Maximizing rewards is typically a function of selecting the right card or cards and of using those cards to pay for everything you can. Even if you have money in your checking account, using corporate credit cards for business purchases lets you accrue benefits and rewards.
3. Pay your balance in full to avoid interest.
Some corporate credit cards charge users an annual fee. And there are a number of business credit cards that don't charge an annual fee, and instead make money when you carry a balance.
Keeping your credit utilization ratio at or below 30 percent is good for your credit rating.
If you're using a no-annual-fee card and you pay your balance in full, the credit card isn't making a dime from you. You get to defer payment until you get your statement, and it doesn't cost you any more to do it. That's a win for users who can pay in full each month.
4. Read up on your benefits.
I'm always amazed at how few business owners really maximize the benefits on their corporate credit cards. For example, they may pay baggage check fees without realizing that they can be reimbursed for some by their credit card. Or they may purchase trip insurance that duplicates coverage from their credit card.
Whether it's access to a VIP airport lounge or extra rewards points for a certain brand of coffee purchases, it pays to know what you're entitled to.
5. Pay attention to your credit utilization ratio.
If you care at all about your credit rating, pay attention to this tip! The single biggest factor in determining your credit rating is your payment history. The second biggest factor is your credit utilization ratio.
What is it?
It's the percentage of the credit that's available to you that you're actually using. Keeping your credit utilization ratio at or below 30 percent is good for your credit rating.
6. Keep business and personal expenses separate.
Yes, I know it's possible to separate your expenses even if you use a single corporate credit card for both business and personal purchases. But I also know that it's more difficult to track expenses that way.
I keep one primary personal card (with great rewards benefits, of course) and one business credit card (again, with great benefits). There's never any question about whether my corporate card is used for legitimate business expenses, and I never field irritated questions from my accountant. It's neat and it's legal, just the way I (and my accountant) like it.
Corporate credit cards can require a little management. If you have an employee making unauthorized purchases, you may have to take the time to shut that down. If you're short one month, you may end up paying a little interest until your revenue picks up. But being wise when you select and use the right card can be beneficial.
Read more articles on credit-card financing.
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