If you have a small business, yes – you need a business credit card.
Business cards often carry lower interest rates and higher credit lines than personal cards, but that’s not the only reason. In order to qualify, you’ll have to be set up as a business, with a business name and possibly an Employer Identification Number.
You’ll need a business address and phone number – but these can be at your home if you are running a legitimate business from your residence. Many people such as building contractors, excavators, landscape artists, and freelancers do have offices in their homes.
You’ve probably read enough about taxation to know that the interest on your personal credit cards is not tax deductible. But interest on business expenses is deductible, so if you carry a business credit card and use it for nothing except business expenses, the interest you pay will be a deduction. And when it comes to tax time, every deduction counts.
If you slip and use that business card to buy the kids’ new shoes, you’ll be out of luck. So if you may need to carry a balance, be careful not to use that credit card for any kind of personal expense. If there’s an expense that could be viewed as personal – such as concert tickets or a restaurant meal – be sure to document the event in your day planner. Note the names of the clients or customers you were entertaining, along information about the business discussion that took place.
Secondly, business credit cards often give benefits such as year-end accounting. You can see at a glance how much you spent on gasoline, office supplies, entertainment, etc. If you give credit cards to your employees for business use, the reports will also tell you how much each employee has spent, and for what.
Your monthly statements are also broken out to show how much each person spent, and where they spent it. This is an excellent way to monitor employee activity and rest assured that your credit is not being used inappropriately.
Then there are the rewards. When business cards offer a rewards program, you get benefits for making those purchases that are essential to your business. Who doesn’t want a little cash back on necessary expenses?
Major credit cards aren’t the only ones to offer benefits to cardholders. Retailers like Staples™ will send you a rebate check at the end of each month based on the previous month’s charges – and will often offer extra cash back for buying their brand. They also mail out “free” coupons to entice cardholders to try new products.
P.T. Barnum said there was a customer born every minute, but considering the threats to consumers, sometimes it seems like there’s a scammer/thief/crook born every minute. Unfortunately, credit cards are one of their prime targets.
One of the latest scams is “credit card shaving.” In this scam, the thief randomly tries 16-digit card numbers until one of them shows as valid. Then, he “shaves” the numbers from a pre-paid card and replaces them with the guessed number.
This sounds like a lot of work, but with the right equipment, putting new numbers on an old card can be done in a manner that most store clerks won’t notice. To prevent the clerk from simply “swiping” the card, the thief disables the magnetic strip on the back, forcing the clerk to key in the numbers.
Someone can be using your card without it ever leaving your wallet.
This is one reason why you must check your credit card statements as soon as they arrive each month, and must notify your card issuer immediately when you spot a bogus charge. Then file a police report, because most credit card companies won’t remove the charges without one.
Another new scam involves stealing your cards from your mailbox. You know that the sticker on new cards tells you to activate the card from your home phone. This was a safety feature to prevent a mail thief from using stolen cards.
Now a new website offers the means to place a call from any phone and make it appear to be coming from any other phone. All the thief has to do after stealing your card is look up your phone number in the local directory.
If the thief plans on long-term use of your account, he or she can contact your credit card company and fill out a change of address so you get neither the card nor the statement showing an ever-enlarging balance due.
If you’re expecting a new card in the mail – either on a new account or a date extension on an existing account – make sure to watch for its arrival. If it doesn’t show up in a reasonable amount of time, call your credit card issuer to see if it has been sent. If so, have them check to see if it has been activated and if there are any charges.
Along with notifying your card issuers and law enforcement, you should notify the credit bureaus immediately when a credit card has been compromised.
De-activate the affected credit card numbers and get new cards, but ask your card issuer to do so in a way that shows you are merely changing account numbers.
Americans cite many reasons why they need only one card. One of the major reasons is that they’re afraid of the temptation presented by multiple lines of credit. If they have more credit, they might use it.
This is a valid concern, and those who cannot resist spending probably shouldn’t have any credit cards. But life is certainly safer and more convenient when you do.
Some experts recommend keeping one credit card with a zero balance – and keeping it in a safe deposit box for emergency use only – such as after a robbery or house fire. This was probably good advice before the banks began closing unused accounts. Now you do need to take the card out and use it at least quarterly or you’re apt to find it has disappeared.
Keeping one credit card exclusively for on line purchases is a safety feature as well. Should your account be compromised, you’ll know which card numbers were stolen and can take action quickly. It’s also easy to spot a bogus charge on a statement with few entries.
Rewards are another good reason for multiple accounts, because different cards offer different rewards. A consumer who plans ahead and keeps track of offers can reap good rewards by using the correct credit card for each purchase.
Along with the rewards, keeping like purchases together on one card helps with record-keeping. It also makes it instantly clear to you if you’re spending more than normal on some part of your budget and need to cut back. Seeing 8 separate charges at the local CD outlet, movie theater, or restaurant might tell you that you’re indulging yourself a little too much!
Multiple cards also boost your credit scores - as long as you keep use under control. Don’t let your charges on any one card rise above 30% of the credit limit in any one month. If you slip and go above the 30%, go on line and make a payment before your next statement date. Of course, having multiple credit cards and credit lines makes it easier to keep a low balance on each of them.
For many, having multiple cards with different due dates makes budgeting and bill-paying easier.
Lastly, if you have multiple cards and one card issuer suddenly decides to cut your credit line or raise your interest, you’ll have somewhere else to turn. You can even transfer balances if another credit card has friendlier terms.
Choosing your cash-back credit card
takes a little more study and investigation than you might think, because the features vary from one to another. In fact, some of them that offer big rewards might not pay off at all – ever.
The first thing to watch for is an annual fee. If you have to pay to carry the card you might have to spend quite a bit just to break even. So unless that annual fee offers some other benefit, such as an extremely low interest rate, you probably want to keep looking.
Next is the kind of cash-back. Is it actual cash, or is it points? If it’s points, how many do you have to accumulate before you can turn them into cash?
Some cards offer cash-back but with a combination of expiration dates and payment thresholds that mean you have to spend a lot in order to ever see the cash back. If the threshold is say, $100 and you’re earning 2%, you’d have to spend $5,000 before you get your rebate. And if your rewards expire at the end of each twelve month period, you could have spent $4,900 without seeing a dime returned to you.
You want rewards that roll over from one year to the next, or that automatically pay out at the end of the period, no matter if you’ve only “earned” $20.
Check to see how you go about getting your cash back – will they automatically send a check or credit your account? Will you have a choice of how to receive it? Or will you need to fill out rebate forms in order to get your money?
If you use your card for business and thus charge and pay off large amounts each month, it makes sense to use a card that rewards you. But be careful, some credit card issuers put a cap on how much you can earn. Some cap your earnings at $300 per year.
Look for restrictions. If the card rewards grocery, gasoline, or restaurant purchases, don’t assume that just because you bought groceries, gas, or a meal that the purchase will qualify. Many of the credit card issuers have significant and surprising limitations with regard to which stores, gasoline outlets, or restaurants qualify.
The bottom line is that if you want to get a card that fits your lifestyle, and will truly give the promised cash back, you have to read all the fine print. It isn’t easy – those agreements are filled with legaleze and the print is minute, but reading it all is the only way to know if you really are going to get what you expect.