Small Business and Credit Cards

If you understand how the cycle of credit cards work, then you can use them to help you, your business, and cash flow and use the credit card company's money for free (often up to 50 days). These key factors are for both your business and personal credit cards.

1. Closing Date:

When you look on your credit card statement there is always a closing date near the top of the statement (the date when the credit card company closes the month for your statement), after that date the transaction are posted on the next month statement (which will be usually a minimum of 30 days later and usually most credit cards carry a grace period of 20 days to make sure the payment is made without any interest). If you charge an item after the closing date you should get about 50 days before payment is due.

Locate your closing date, and place a note on the back of your credit cards (small number for the date it closes, like 19) (in the signature line) to remind you when it closes. If you have several credit cards, note each card.

2. Improved Credit Score:

Years ago I had a good credit score, but wanted to improve it, so I always make sure the payments arrived a few days before the payment was due, and never used the full credit limit on each card. Then I checked my credit report for errors and reported any mistakes as soon as they were discovered. This helped build my credit score and I was approved for higher credit limits.

3. No Annual Fee & Credit Limits:

Part of the smart method in using credit cards is to find ones with no annual fee, or if there is one, a very low one. One key factor in generating great credit and improved credit scores is keep track of your credit limit and never max out any credit card to that limit (keep the total about 25% below the limit always).

Wise use of Credit Cards for your small business is essential.

After using the credit card for over a year with payments being direct back on time, you should call and ask for the annual fee to be removed or find another credit card with no annual fee (a good credit score is often needed to get cards without annual fees).

· If you use a debit card since you have had issues and problems paying Visa or MasterCard on time or credit issues with over-extension, then continue to use your debit card, now and consider this for later.

Credit & Debit Card Purchases: Keep in mind you need all receipts or printout of any debit or credit purchase (and this includes all online transactions), along with gas receipts (even if you are using the mileage rate on your vehicle) to proof the enough gas was purchased to support the mileage deduction. All receipts need to be maintain for 7 years.

My Personal Example:

I have four (business) credit cards. This first two of them have closing dates of the 10th of the month, and the other two have closing dates of the 19th and the other is the 24th. When I need to make a credit purchase, I just review my wallet to see which card just closed out, or sometime I might need to wait a few days to get one of the closing dates to pass, then charge the item. This normally gives me about 50 days before I need to pay for this purchase (this is great when you need new equipment, computers, or any important purchases, and wish to keep important cash flow in the bank).

I have several debit cards, but have never used one (ever), since I can use the Credit Card’s money often up to about 50 days. But my big issue with debit cards is that they are taking your money from your account today, and I learned over 25 years ago about closing dates and the benefit of “Purchasing on Credit after the Closing Date”, using their money not mine. Use your credit cards wisely!

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