Small Business Funding

Best Practices for Using a Small Business Credit Card

September 5, 2023
6 min read

A small business credit card can be a powerful financial tool—if you know how to use it effectively

With the right strategy, your business can accomplish incredible things. With the wrong strategy, even your best laid plans could be undermined.

It all comes down to the details, and today, we’re going to give you the tools you need to succeed.

In this short guide, we’ll introduce you to Hello Alice’s best practices for using a small business credit card. 

We’ll discuss how you can leverage your credit card’s features, strengthen your business credit, and avoid common financial pitfalls along the way.

Let’s get started!

Small Business Credit Card: A Brief Overview

As a small business owner, you understand the value of patience.

You know that in today’s crowded SMB market, everything takes time—from conceptualizing your company, to building your brand, to obtaining sufficient capital.

In a world where time is of the essence, a small business credit card provides a competitive advantage as it gives you immediate access to funding. As soon as you qualify for a card, you can make essential purchases and enhance your business in profound new ways.

And that’s only part of the picture. 

A small business credit card typically has higher spending limits than consumer credit cards, and it will often come with 0% introductory APR. 

Plus, after you qualify for a small business credit card, you’ll be able to start earning points, cashback, and other great rewards. 

Best of all, your small business credit card can help you build business credit over time—which will unlock a wide variety of financial products to help you secure your business’ future. 

Want to learn more about the many benefits of small business credit cards?

Check out our comprehensive guide to learn more!

Small Business Credit Card Best Practices

Sometimes, it’s important to acknowledge hard truths.

So here it goes: more often than not, we’re on our own when it comes to financial literacy. That’s true for consumers and small business owners alike. 

While cars and computers come with user manuals, financial products generally do not.

In fact, most credit card providers simply seem to say “good luck,” before leaving us with more questions than answers (and multiple pages of fine print).

When it comes to your economic well-being (and the economic well-being of your business) you’re often the first and last line of defense.

Not to fear: at Hello Alice, we are here to help.

In the section below you will find our seven essential best practices for using your small business credit card. While this list is non-exhaustive, it should get you on the right track as you begin your small business credit card adventure.

1. Leverage Your Credit Card’s Features

Once you qualify for a small business credit card, it’s crucial to adjust the way you make purchases according to the type of card you opened and the features it offers.

For example, let’s say your new small business credit card lets you earn 2x points on all eligible rideshares and restaurant purchases. 

In that case, you’ll want to ensure you put every business-related Uber or Lyft on the card, along with each client dinner. 

That’s just one of the many ways to leverage your credit card’s specific perks. Over time, you’ll be able to rack up points, enjoy great rewards, and reinvest your earnings back into the business.

P.S. Don’t hesitate to put every eligible business expense on the card, however small it may seem. After all, most business expenses are tax-deductible. The more you spend, the more you save!

2. Maintain a Healthy Credit Utilization Ratio

According to financial experts, you should never borrow more than 30% of your total credit limit.

The reason is clear: when your credit utilization ratio exceeds 30%, your credit score drops.

And what is your “credit utilization ratio,” exactly? It’s a simple mathematical formula: the amount of credit you’re using, divided by the total amount of credit you have available

For example, let’s say you have two business credit cards—one with a $5,000 credit limit, and another with a $25,000 credit limit.

In that case, your total credit limit would be $30,000. 

To maintain a healthy credit utilization ratio of 30%, you should try to use no more than $9,000 at any given time.

This may seem like a juggling act at first, but it will help preserve your financial health, protect you from getting overextended, and even improve your business credit score. 

3. Pay Your Bills On Time

In contrast to your individual FICO score, which adheres to a common industry standard, the calculation of business scores differs across the three major reporting agencies: Dun & Bradstreet, Equifax, and Experian. 

These agencies don’t uniformly gather and authenticate the same kinds of data, and the elements they consider in their assessment vary.

However, there is a category that all three consider vital when measuring creditworthiness: payment history/delinquency.

That’s why it’s so important to always pay your bills on time.

In fact, timely payments are one of the best ways to improve your score, just as late payments are a sure way to drive it down. 

Worse yet, delinquent payments can quickly drive up compound interest and initiate a debt spiral for your business. 

4. Use Your Card To Build Business Credit

Whenever you pay your credit card on time (and in full), you essentially tell your credit card provider:

“I’m financially responsible. Let’s stay in business together.”

Each timely payment is another step in the right direction towards building a solid business credit score. 

Rest assured, over time, leading bureaus like Dun & Bradstreet will take note of your resolve and make it easier for you to access better financial products (and with more attractive terms). 

5. Keep Business and Personal Expenses Separate

Small business credit cards help promote better bookkeeping. 

After all, they provide an easy way to separate your personal and business expenses. In fact, some small business credit cards will automatically create an itemized PDF expense report at the end of the year.

That alone will save you countless hours come tax season.

Nevertheless, small business credit cards can actually make things a little too convenient. After all, it’s easy to start swiping away at Starbucks and forget that your card is only for business expenses.

While it’s not illegal to use a small business credit card for personal needs, you should avoid it. In most cases, putting personal expenses on a small business credit card will break the terms of your agreement and lead to the termination of your account.

In summary: it’s best to keep business and personal expenses separate. After all, business expenses are generally tax-deductible, and you’ll want to preserve that essential perk when tax season rolls around (especially if the IRS ever conducts an audit).

6. Regularly Review Your Account Statements and Credit Report 

The digital economy moves at the speed of light.

No matter how busy you are leading your company, it’s important to remember that small errors can creep into your business accounts and undermine your SMB’s financial wellness.

That’s why it’s vital to consistently review your account statements and ensure all charges are legitimate. While it’s a great way to save money, it’s also an essential strategy to eliminate potentially fraudulent behavior.

With that in mind, it’s equally important to review your business credit report at least once a year.

Remember: each of the three major credit bureaus—Equifax Business, Experian Business, and Dun & Bradstreet—has their own scoring system for your business credit report.

In other words, while each credit report may be similar, they’re not the same. So be sure to request a copy of your business credit report from each agency and carefully inspect them all.

Note: If you identify any errors on a report, contact the appropriate credit bureau immediately.

7. Secure Your Card Information and Employee Spending

Cybercrime is a reality in our digital economy, and small business credit cards are quite desirable to hackers.

To protect your account, effectively educate your employees, implement two-factor authentication wherever possible, and update your password(s) as regularly as you can.

It’s equally important for your employees to stay in control of their credit card spending. If you provide corporate cards to your staff, ensure that you promote an environment of accountability. 

Carefully set credit card limits for employees, and demand itemized receipts for all purchases. 

While these policies may seem stringent, they are essential to the financial health of your firm. 

Earn, Redeem, Grow: The Hello Alice Small Business Mastercard®

Now that you are familiar with some of the foundational best practices for using your small business credit card, you’re in a better position to fully leverage your card’s features as you protect your credit score and build business credit.

At Hello Alice, we’re dedicated to your short and long-term success. 

A core tenet of what we do and who we are is financial education and empowerment. That’s why the Hello Alice Small Business Mastercard® comes with 1-1 business coaching with professional advisors—plus a number of additional benefits.

To learn more about Hello Alice and how we can help grow your business through grants, education, and our small business credit card, we recommend reading through our FAQs page.

Cards are issued by First National Bank of Omaha (FNBO) pursuant to a license from Mastercard International Incorporated. Mastercard is a registered trademark and the circles design is a trademark of Mastercard International Incorporated.

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