By Evan Carmichael on April 24th, 2014
This post is brought to you by the new American Express Business Gold Rewards Card. Views below are 100% my own.
I love my credit card.
Whenever I’m paying for something I always choose credit over debit, cheque, or cash.
I actually very rarely carry much cash on me and tend to avoid places that don’t accept credit cards.
This is the most important reason for me.
I value my time and you should too.
My bookkeeping takes me 15 minutes every quarter.
Because all my expenses are on my credit card I just have to log into my online banking, download my statements, and import them into my accounting software.
The software automatically recognizes and categorizes all the expenses from places I’ve already bought from before (at least 90% of my purchases) and all that’s left is for me to assign categories to the suppliers I’m using for the first time.
Huge. Time. Saver.
2. Cash Flow
I don’t recommend funding your business on credit cards.
The interest rates are crazy high and you should pay off the full balance every month.
You should only spend what you know you can afford and pay back.
That being said, why not give yourself an extra month to pay it back?
Cash flow is more important than profitability for startup entrepreneurs.
It’s easy to be profitable and go bankrupt because your customers are taking too long to pay you.
Your expenses are going out and the revenue isn’t coming in fast enough.
If you pay off the full balance each month there is no financial penalty.
So give yourself an extra month of cash to ease the burden!
Most credit cards have a rewards program attached to them.
Here’s a chance to get free stuff when you’re buying the things you need to buy anyway.
I’ve gotten free trips, extra cash in my pocket, free insurance packages, and lots of other bonuses just from making purchases on my credit card.
Every time I make a vacation plan a good chunk (or all) of it is already paid for thanks for the rewards I’ve earned on my credit card.
4. Credit Score
Having a credit card and paying off the full balance every month does wonders for your credit score.
Last December I sold my house and moved into a new apartment – I was able to get a 10% discount on my monthly rent because I have an exceptional credit score.
The owner said he’d rather have a great tenant who is reliable and who he knows will pay than worry about sketchy tenants who might skip town on him.
Thank you credit cards!
I’d honestly use credit cards for all my purchases just for the bookkeeping advantage but the other bonuses make it a no-brainer.
How to Choose
Here are a few things to look at when picking your next credit card:
a) Import / export statements
I haven’t really seen a credit card that doesn’t allow you to export your statements and most software packages allow for all the major credit cards… but double-check just in case.
b) Credit limit
Understand how much you need and how much the companies are offering. You can negotiate a higher limit if you have a good credit history. If you don’t it’s time to start building it up! This will help you in both your business and your personal life. Note: Some credit cards have a dynamic credit limit – you don’t have to negotiate, it adjusts automatically based on your spending habits.
Depending on how much you’re spending and the lifestyle you lead there is a rewards program for you. Some are geared towards getting cash back. Others are for travel. Others are specifically for small business owners. Do your homework and find the one that’s best for you.
Some credit cards come with annual fees. For me, the fee is the last thing I look at. I know I’m getting way more value in return than what I’m paying. I also always choose credit cards that have annual fees. The benefits you get with them are just way too valuable. It’s spending pennies to get dollars back.
e) Interest rates
I’m hesitant to even include this on the list. The interest rate shouldn’t matter because you shouldn’t be keeping a balance. Pay off your credit card bills in full every month and don’t spend more than what you can afford. Another option could be to go with a charge card where you can’t carry a balance from month to month.
What do you think?
How do you use credit cards?
Do you have a question about credit cards that I can help answer?
Leave a comment below! I look forward to hearing from you.
Sponsored by American Express
This post is sponsored by American Express. They reached out to me because they wanted my thoughts on credit cards and I thought it would be a valuable post to share with you. All the views expressed above are my own and they didn’t tell me what to write. I really do love credit cards as a tool to help entrepreneurs and I use mine daily.
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