When someone applies for a loan and receives funding, it is the personâ€™s obligation to repay the loan in monthly installments depending on the agreement. When small business owners use their credit cards to make purchases, there could be a temptation to ignore these monthly bills, but then the balance would pile up. In addition, the personâ€™s credit could be adversely affected. It is advised that consumers treat their credit card as if it were a financed loan. If not, there may be a significant financial burden due to the interest and finance charges on the money owed.
Pay Your Monthly Statement
To ensure that you stick within a certain budget, you should assess your household and small business budget, figuring out how much money you are obligated to pay back to the financial institution prior to receiving your first monthly statement. When you get your bill, donâ€™t just pay the minimum amount on the statement. Instead, if you can afford to, double the payments. In doing so, you will pay off the balance sooner and it will improve your credit score. Learn more about how to create and manage a budget
Donâ€™t Overextend Yourself
When you are applying for a loan, it is better to only take the exact amount that you need. The same is true when using a credit card. Use only the amount of money that you know that you can pay back. Donâ€™t overextend yourself financially but paying for things you canâ€™t afford. If at all possible, you should try to maintain a balance of less than thirty percent of the credit limit.
Are You Reaching Your Credit Limit
If you find that your balance is approaching close to your credit limit, then it is time to react. Why? Well, this is a warning sign to your creditors that you are strapped for cash. It can also reduce your credit score. Eventually, it would harm you financially when you get ready to apply for a business or personal loan. If you have to maintain a balance above thirty percent of your credit limit, you should at least make sure you pay an extra amount on your balance each month, in addition to the minimum.
Many Americans and business owners carry one or more credit card debt. Some people will use balance transfers to consolidate their debt. It is not uncommon to have balances transferred from one credit card to a low interest card or zero-percent interest card. This helps to save on interest charges and makes repaying your credit card much more convenient since you only make one payment each month on one credit card. Make sure that the transfer fee is no more than three percent. Secondly, you should ensure that the credit limit is sufficiently high to accommodate the entire balance.
Business Credit Card
Be aware that if you carry a business credit card and you want to get a second card for a staff member or partner, you may be charged an additional fee. Generally, both the cardholder and the business entity will be liable to pay the monthly bill.
Now that you know how to use your credit card wisely, speak to one of our Denver tax professional at Bloch, Rothman, and Associates
in order to prepare your business taxes or to utilize our payroll services. We have the tax professional to help you with all of your questions. Call us today at 303-321-7160.