Years ago, I was sent a credit card from a large national bank.
Having had some rough financial years early in my business, it was pleasant to have a bank courting my business, even if their offer came via mail! I had come out of those rough times with nary a debt, and I was loathe to incur new debt, so the card sat in my wallet for months.
One day, the bank sent an interesting note with their regular monthly mailing; it had an offer that I could not refuse.
"Use your bank issued credit card twice in the next month and receive a twenty-five dollar credit on the following month's bill.
" The bank would actually pay me to use the card- and as I happened to be furnishing a new apartment; this was a deal I could take advantage of.
Sure enough, after two purchases, my next bill came in with a credit, and with perfect timing, at that.
Brendle's, a small retail chain was closing up their stores and had products marked down 50-75 percent, and the credit went a bit further there.
This was my first lesson in using credit for gain.
Banks and credit companies know that the law of averages plays in their favor when offering special credit deals, so they have little concern for the few that actually use their products and take advantage of them! While some of the sweet deals of yesterday are no longer available, there are still plenty of opportunities to use the credit companies to increase your gain, instead of theirs.
One would be remiss if he did not discuss the hazards of credit card usage before encouraging such a practice.
As we head into the second decade of the 2000's, the danger of irresponsible credit usage abounds in just about every financial sector; even our government is jumping into the fray, using debt to try to stimulate a struggling economy.
Banks have been squeezed by unprecedented levels of foreclosures and defaults on other types of loans, as well.
Small businesses have seen difficulty in getting financing for projects, or have had banks tighten up credit lines at renewal.
Most of these issues have their roots in the abuse of our financial system; this abuse has been promoted by the very institutions that our financial systems are built around, namely, the banks.
To help stabilize our economy, new government regulations have been put in place designed to shrink the amount of unsecured credit that financial institutions hold.
This has made the widespread use of credit card debt a bit tougher for many small business owners.
Lately, consumers have been surprised to see a letter from their credit card company informing them of a decrease in their credit limit.
Those who have been imprudent in their use of credit have little hope of taking advantage of the benefits of "plastic;" those who have been responsible and are disciplined can use this avenue of financing, even if their opportunities are slightly diminished by today's economic problems.
While one might find numerous reasons to use credit cards to finance business purchases and expenses, there are certainly a few worth mentioning here.
First on this short list would be the ability to reap rewards.
User rewards come in all forms- from hotel stays, to airline mileage rewards, to bonus points toward purchases.
Many consumers have taken advantage of certain credit cards issued through retail or mail order establishments due to the discounts that are offered, free shipping, or point towards the purchase of products.
A business owner who travels extensively might find the frequent flier cards are the best option for them.
The wise card user will be careful when looking at the fine print that comes with these cards, as some programs are much more flexible with their rewards than others.
The business that spends large amounts on reward cards can end up with impressive amounts of points after a year; these can be used personally, or can be used as the businesses own reward system for deserving employees.
For those counting their rewards, monthly expenses will build those balances quickly.
Beyond the reward programs, the ability to use credit accounts to manage expenses is a second reason that credit cards can be useful to the business owner.
Years ago, American Express was on the fore front of this type of usage by offering very detailed expense reports with every monthly bill.
Today, every business card is offering this type of billing.
When starting a new business, a few expenses are easy to manage; over time, the potential monthly charges and regular invoices can really add up, making bookkeeping a time wasting chore.
Whether monthly expenditures are entered manually or through a software interface such as QuickBooks, the ability to deal with expenses once a month helps alleviate some of the office work a small business owner is liable to be saddled with.
When one couples electronic billing and banking, almost the entire spectrum of a business' accounts payable can be managed with a credit card.
It was not long ago that premiums for using credit cards for bill payment were common; now, most vendors, including public utilities and localities, treat credit card payments in the same way they would treat bank payments.
Equipment and raw material purchases, which are often made on account with individual vendors, could be paid with credit cards, as well.
In today's economy, even vendors who declined to take cards for payment of invoices are more willing to accept any form of payment.
This brings us to a third potential benefit that credit cards offer.
When a business has to make large purchases to produce products that move quickly, a credit line used to be the best option.
Credit cards have become a second option for these purchases.
A good example of this might be in the home improvement industry; an individual project might involve the purchase of several big ticket items that will be paid for upon completion of the project.
By using a credit card for such purchases, the project can be financed for the short term without the need to access a credit line.
Credit cards are more user friendly than working with a bank and one can be more creative in their use.
Retailers and suppliers have even begun to promote credit card use by issuing their own cards.
GE Capital, a major backer of these non-bank cards, has developed an attractive program with creative perks for everyone from small suppliers to industry giants such as Lowe's.
The ability to use credit cards as a way to finance business has really helped many people start or expand ventures, a challenge that would have been made more difficult if banks were the only source of financing.
On the other hand, there are many people who have experienced financial failure due to their irresponsible use of credit.
The dangers are obvious; overspending, the feeling of "easy money," thinking that the minimum payment is enough to pay- these are all pitfalls that many fall into.
When using plastic for business expenses, the bill should be paid in full every month.
As business expenses are accrued throughout the month, one should be saving the cash normally used for these payments so that it can be applied to the credit card bill when it arrives.
When making a large capital purchase, one should make every effort to pay as much as feasible; after the business has received compensation for the project that was financed by the card, the balance should be paid off immediately.
Minimum charges should be viewed as the card issuer's way of making big bucks on your purchases; your budget should never be based on the minimum payments.
There are many financial decisions that "experts" warn about; the warnings are often blanket statements but they usually apply to the folks who are irresponsible.
Credit card use is one of those decisions that many financial advisors rail against, but for the business owner, the benefits often far outweigh the risks.
As you evaluate your business needs, ask yourself if you have the discipline to use a credit card wisely.
If you think you do, and your financial history bears this out, take advantage of those credit card companies.
They won't mind!