Using Credit Cards for Small Business: Journal Exercise

It is time to check in and ensure you are staying on track with your financial management goals now that the first quarter has passed.

You may have used credit cards in 2015 to secure a loan, purchase business supplies or pay off debt. If that was not a deliberate tactic for your small business growth strategy, we want to help you avoid repeating financial decisions that might not be right for your business.

Business mentor and credit repair consultant, Bill Rumping, offers his advice on how to manage credit card use for small business purchases.

As debt advisors we talk to many small businesses who are experiencing high credit card debt and need assistance in order to stay in business.  Consider these guidelines to help your business avoid a credit card crisis.

Use Multiple Types of Financing

Credit cards should not be your only source of financing.  If you are just starting your company this is even more important because your spending may be higher than your income for an extended period of time.

All startup companies should have some startup funds that can be used to help the company establish itself until monthly revenue is consistent and covers much of the monthly expenses.  Startup funds may come from savings, or loans from family, friends or existing business relationships.

Separate Personal and Business Purchases

Whether you use personal credit cards or business credit cards, your business and personal expenditures should not be on the same card.  Separating these purchases makes reporting much easier and gives you clearer insight into the expenses needed to operate your business.

Separating your business and personal expenses also helps you separate the emotional way you use credit cards.  If you tend to use your personal credit card for impulse purchases, you may find yourself making impulse purchases for your business – like the really nice desk lamp that you don’t really need.  Keeping your business expenses on a separate credit card will help you avoid those impulse buys and focus on what you need for the business to operate.

Pick the Right Credit Card

Take the time to pick out the right credit card for your business.  Business credit cards help you build business credit so if business growth and access to additional capital is in your future plans you should seriously consider a business credit card.

Consider your bank’s credit card offer but also look at other options.  Using Google you can search for ‘best small business credit cards of 2016′ or go directly to, or to research alternatives.

Consider these questions and choose the card that provides the best balance of business benefits to annual costs.

  • Is there an annual fee?
  • What is the yearly interest rate?
  • Is there free interest for an introductory period?
  • Are there business friendly terms such as discounts for paying early or options for delayed payments?
  • How high of a credit limit do they provide and how often could your credit limit increase?
  • What perks and services are offered?
  • Do they offer credit cards for employees with spending limits?
  • What would cause your interest rate to increase?

Credit Card Usage Requires Discipline

Successful use of credit cards to finance a business requires discipline.  Ewing Marion Kauffman Foundation has found that for every $1,000 in credit-card debt that a small business takes on, its chances of long-term survival fall by more than 2 percent.

Increase your chance of success by following some simple guidelines:

  • Only buy what you need immediately to support your business.

  • Make your payments on time to avoid being reported to credit bureaus.

  • Don’t use cash withdrawals against your credit card.

  • Avoid using your full credit limit.  Your debt to credit ratio is an important piece of your credit score.

  • Pay off your credit card balance each month.  Or at least pay 2-3 times the minimum payment to prevent your balance from getting too high.

Remember to keep an eye out for any misuse of the business credit cards just as you would for your own personal credit cards.

Journal Activity:  Reflecting on Bill’s advice, take 30 minutes to do the following.  After you separate the personal and business expenses reflect on your spending habits. Make a note of how you are feeling when you purchased an item.  Think about what time of day it was.  Was the purchase online from a pop up or in the store near the checkout lane? Did you notice the item because you needed it or because of the advertisement?  What about the advertisement made you take a second look?  These questions are important as they will help you to identify when you are making purchases and why.  You should do this in real time as well.  Right before you buy an item notice the time, surroundings and ask yourself why you are buying.

Now think about the use of the item.  Did you use the item as soon as you got it, put it away never to be seen again or take it back? How often do you use the item? Did you give it to someone else to use and does that person use it?  Again, this will help you to begin to discipline yourself when it comes to both personal and business purchases.  We will add this activity to your Life Theme activity later in the quarter.

Bill Rumping is the Debt Expert of St. Louis for PCS Debt Relief.  If you or someone else you know has an outstanding amount of credit card debt contact Bill at or 314-607-4204.

Darcella K Craven is currently the Executive Director of the Veterans Business Resource Center, a non-profit organization dedicated to assisting Honorably Discharged Veterans, National Guard and Reservist and Active Duty personnel and their families with transitioning back into civilian life with starting and expanding businesses. Darcella has been featured in numerous articles for her transition from the military and the welfare system to an accomplished business woman and is actively involved in many civic organizations.  



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