Business Credit Cards

Amex Plum Card Review

May 14th, 2009

plumcardDuring an informal poll of several small-to-mid-level Adwords advertisers, one of the discussions turned to their favorite credit cards.  Unsurprisingly, most of the cards we listed as the best credit cards for Adwords made the cut.  The Plum Card, one of those we featured, turned up as the overwhelming favorite.  Let’s see why.

The Plum Card has two major benefits going for it:

1. It offers a 1.5% rebate for all bills settled within 10 days.

2. If you make just 10% of your payment on time, you can defer the remaining payment for up to 60 days.

Once I read those, everything just made sense.  It is, indeed, a tremendous benefit to Adwords advertisers.   A lot of Adwords advertisers I know max out their credit cards within a week, some even after five days.  As such, they need to pay off all credit charges incurred in the first place.  The Plum Card essentially rewards them with a 1.5% rebate for something they’ll be doing in the regular course of business anyway.

The 10% payment makes it convenient if you do run into cashflow trouble, essentially allowing you to float your spending with just a minimum of liquid funds.  As a former manager of Adwords campaigns, I can understand the occasional need for this.  As long as you don’t make it a habit, it offers plenty of flexibility.

What’s the price of this convenience?  Pretty steep, as it turns out.  The Plum Card comes with a whopping $185 annual fee, along with pretty stiff penalties.  As an Amex Business card, the Plum Card comes with all usual privileges, including discounts at numerous hotels, merchants and car rentals.

It’s a bad idea for a consumer card, but a veritable godsend for PPC advertisers.

Company Credit Cards: Who Pays?

May 6th, 2009

payingWho, ultimately, carries the responsibility for company credit cards, you or the business?  Some folks will tell you it’s the company while others will say the burden’s on your end.  The truth, in fact, depends on the contract behind the credit card issued under your name.

When accepting the offer of a company credit card, always clarify the terms of its contract with your employer.  In some cases, you are merely an authorized card user, with the company held responsible for the actual payments.  In others, it is essentially your credit card that’s merely affiliated with the organization employing you (a good way to get a credit card if you have bad ratings).

Using Personal Credit Cards

For the most part, you can use your personal credit card for business-related expenses, pay off the balance on time then reimburse them later.  While this isn’t that big of an issue, it can be if you work in a large organization where approval for reimbursements can take several signatures.  Simply put, your employer is basically ending up using your money and all you’re getting are extra points (which, depending on what rewards program you’re on, may not even be all that good).

If this becomes a problem for you, we highly recommend getting a company credit card where your employers handle the payments.  This should save you the headache of having to fund the payments upfront (to avoid interests) as well as avoid potential problems in the future (like getting laid off with business charges still on your account).

Business Credit Cards And Your Personal Credit Rating

April 22nd, 2009

businesscardBusiness credit cards are debt facilities for your business.  As such, any problems you encounter with it are supposed to only affect your business scores, not your personal credit standing.  Unfortunately, that’s not always the way it works.

If you are a small business owner, there’s a good chance that your business credit card is affecting your credit rating.  If you are a personal guarantor for the business credit card and used your personal social security number to apply for it (as many small business owners do), you are just as liable for the debt as your business is.  As such, any problems you encounter with the card – from missed payments to going over the limit – reflects on your credit report.

Corporate credit cards, on the other hand, work in a different way.  Different contracts are usually provided for different accounts, so you will need to clarify it with your  company’s personnel resources.  From what I’ve seen, though, you’re usually off-the-hook when it comes to corporate cards.

If you recently ordered a copy of your credit report, you can check it to see if the business credit card is declared as one of your accounts.  Should you find it there, it’s safe to assume that it will affect your overall credit score.  As such, you need to treat it the same way you treat any regular credit card – carefully looking over what gets included in your credit report to ensure accuracy.

Business Credit Scores: What You Need To Know

April 9th, 2009

paydexscoreJust like consumers have credit scores that financial institutions often refer to before approving loan and credit applications, businesses have a similar facility that allows lenders an easy way to evaluate creditworthiness.  A number of these companies have launched over the past several years, although Paydex from Dun & Bradstreet continues to be the single major source for business credit reporting.

Instead of accounting for a wide variety of factors, the Paydex uses a single indicator to determine your business’ credit ranking:  how well your business is able to timely payments under the agreed-upon terms.  Scores are presented as a single number from 0 to 100, with any business ranking above 80 considered a “low-risk” investment for creditors.

To begin establishing a credit score with Paydex, you will need to get a D-U-N-S number from D&B (the company behind Paydex), a unique nine-digit sequence that is used to keep track and identify hundreds of millions of businesses worldwide.  Once you’ve gotten a D-U-N-S number, you can use that to establish a small line of credit with suppliers (such as office supply companies) to get you started.  Make sure that all suppliers you work with report their transactions to D&B.  Otherwise, you won’t earn any credit for the business you do with them.

Once you have a Paydex account, it is important to keep it active.  Since Paydex regularly tracks your business with suppliers and creditors, an inactive account likely means business is a little sleepy.  Even when you have scores well above 80, inactivity will cause it to drop.  Come time you actually need to make a loan or get a business credit card, you’ll end having a difficult time.

Business Credit Cards: What To Watch Out For

April 8th, 2009

businessDuring these times when credit is becoming harder and harder to get, business credit cards have taken the place of small business loans for many companies.  While providing many benefits, business credit cards are just like their consumer counterparts – they can lead to trouble when used unwittingly.

These are the things you need to watch out for:

Late Fees. According to a research from American Express, late fees from the business credit card sector reach an average of $2.9 billion a year.  While your own charges may seem like a speck in the face of that, realize that it’s money left on the table – not a good idea at all.

Watch Out For Introductory Offers.
Everyone loves zero percent introductory rates.  Problem is, they’re too good we end up forgetting them as we plan our business expenses.  If you’ve been counting on the zero interest to beef up your bottom line, make sure the sudden surge from 0% to 10%+ doesn’t hurt you.

Avoid Personal Spending On Business Accounts. As with many things in life, mixing business and personal spending is a recipe for disaster – one that you’d much rather not deal with.  Keep accounts separate, with no concessions.  Even at the most tempting instances, avoid it with all your might.

Set Your Own Ceiling.
Just like consumer credit cards, you’ll have to watch for how much balance you run up on your business accounts.  Spend too much and you can be looking at a business disaster – one that leaves your source of income in really bad shape.

Dynamic Currency Conversion: Just Say No

March 28th, 2009

convert1Using your credit card abroad can prove a costly affair.  If you don’t watch your card’s billing mindfully, you could be paying through the nose for charges and fees as a result of overseas use.

Dynamic Currency Conversion

Anytime a merchant asks you if you would like the charges to your credit card to be made “in your home currency,” they’re talking about a Dynamic Currency Conversion.  Instead of letting the credit card companies handle the conversion, the merchant does it on their end.

While it might sound like a smart idea (since you can see your charges on the currency your account is going to billed in), this offer is really nothing more than a scam.  The conversion rate the merchant uses on these types of purchases are so ridiculously skewed (read: higher than actual), you’re literally paying extra money for nothing.  Always say an emphatic “NO” when you’re asked.

Foreign Transaction Fees

While some merchants will try to convince you that charging in your native currency will remove the Foreign Transaction Fees usually levied by credit card companies, they’re really guessing at best.  Some credit card issuers won’t charge the fees, while others will continue to do so.  It all depends on your credit cards’ terms, not the word of some merchant who stands to eke out a little more profit from the deal if you agree.

Legality

As much as we would like to declare these types of setup as fraudulent, they’re actually legal, as long as you agree once you’re asked.  Always disagree to being charged with an automatic currency conversion – there’s absolutely zero benefits for you when you let them.

Balance Transfer Checks: Use With Caution

March 17th, 2009

0apr1Unlike most people who are getting their credit limits unduly shaved, mine actually went up for one of my credit cards.  Along with the news of my newfound credit line came several pieces of checks, which the issuer is sending along with an offer for a balance transfer deal.

According to the letter, I can use the checks to pay off balances on other credit cards and move the balance to my account with them using my newfound credit limit (which is about four times what my old credit limit was).  The offer is 0% fixed APR for one year with 3% balance transfer fees.

It’s a pretty typical balance transfer offer, which would be interesting if I actually carried high balances on other cards.  Of course, I don’t.  If I did, do you think they’d actually give me a 5-figure credit limit in this economic climate?

They knew I had very good credit record and I’m guessing they’re also clued in that I paid my balances monthly.  So why would they even offer me a balance transfer deal?  They really weren’t.  On the same letter, right below the fold, is where the real pitch is.  According to the issuer, I can “use these checks to…” basically pay for a zillion other things, from vacations to a car down payment.

If you receive the same communication from your credit card company, do note that this is the exact same thing that has left people in dire debt from credit card misuse.  With those checks and the 0% 12-month offer, spending money on things you don’t need does seem mighty tempting.  Use with caution or, better yet, put it through the shredder in case you don’t need a balance transfer right now.

Advantages Of A Business Credit Card Part II

February 15th, 2009

Yesterday, we talked about business credit cards and their distinct advantage over those geared towards regular consumers. Today we continue the discussion of their benefits and why you need them in your small business.

Multiple Linked Cards

The more your business grows, the more your business credit cards will be of use. As you expand your business and employ more people, you will inevitably begin assigning some of the purchasing tasks under their care. When you have a business credit card, you can easily request for multiple linked cards, adding employees as accessory cardholders to your business account.

Expense Tracking

With the majority of business credit cards, you also get free expense accounting that breaks transactions down by employee among other options, greatly simplifying your need to track spending in other ways. Monthly and year end summaries of credit card statements can list all expenses, itemized and categorized accordingly. Sure beats having to review piles of receipts and requests for reimbursement at the end of the month!

Build Business Credit

As a new, fledgling business, you won’t carry much clout. When you begin using a business credit card, though, with your business tax ID linked to the account, you can begin building your small company’s credit history. While it may not seem vital at the moment, developing a credit report for your business can mean the difference between growing your company with an infusion of capital loans or staying a small fish in the pond in the not-so-distant future. Why not give your business the edge?

Advantages Of A Business Credit Card Part I

February 14th, 2009

Business credit cards can bring many benefits to cardholders that are otherwise unavailable in regular consumer credit cards. This alone warrants their use whenever one is available to you. If you’ve never owned a business credit card before, you may want to look at these great advantages that you can be privy to with one.

Discounts And Rewards

Business credit cards simply offer the best discounts for business-related expenses, saving you plenty of money in a wide range of categories including supplies, furnishings, equipment, airline tickets, gas, car rentals and communication services. Some business credit cards even get you cash back and reward points for purchases on those categories, which can literally translate into a considerable amount at the end of a year.

Credit Limit

Since they are intended for official use, business credit cards carry much higher balances than their regular consumer-grade counterparts. If you are a small entrepreneur or a freelancer, getting a business credit card can give you higher credit lines that you can use to help fund your fledgling enterprise. Coupled with offers like 0% introductory APRs and low-rate balance transfers, business credit cards can prove a lifesaver!

Taxes And Liabilities

As your business expands, the more important it will be to separate your personal purchases from your business expenses. While you can get away with it as a single proprietor, it’s still not a good idea. Having a business credit card separate from your personal ones will go a long way towards having better organized finances, which should further help ease your transition when your solo enterprise does move on to bigger things.

More Benefits

Check back tomorrow for Part II!

Small Business Credit Cards Versus Traditional Lines Of Credit

February 1st, 2009

These days, more and more small businesses are relying on credit card use over more traditional forms of credit. While credit card should be a general no-no in the minds of most people, why are so many businesses turning to its use?

Put simply, credit cards afford businesses a flexibility that traditional loans and bank lines of credit simply don’t give. You can use it month in and month out, without needing to file additional paper work or hold meetings with any bank managers. Traditional types of long-term debt like bank loans and SBA, while eventually offering better payment rates, are simply harder to get approved for.

For many small businesses, using credit cards for this months expenses and paying it off in full before the grace period passes can be enough of a breathing room to facilitate operations, without paying any extra fees. Those 21 days can literally mean the difference between being able to run a payroll or asking your employees to wait another three weeks before getting their salaries.

For a few other businesses who have the cash on hand, small business credit cards offer a convenient way of purchasing items. It sure beats having to sign for petty cash every day for every little expense that crops up. Additionally, credit card statements offer great benefits as a tool to track your company spending – for many credit cards with online control panels, you can simply download the numbers and have it integrated into your financial tools, facilitating hassle-free expense management.

Even better, with so many rewards cards offered for small businesses, you can earn a little extra when using plastic. Unless the card carries serious fees and charges, there’s really little point not to opt for one for small business purchases.