Multiple business credit cards are widely used to fund project start-up costs, pay bills, pay debt and fund day to day expenses. On average, two business credit cards are used by small businesses, often with co-owners having access to one each. Cut that in half!
Having multiple credit cards may suit very large businesses. For the rest of us, we would be prudent to think about having only one card.
When a business owner is asked why they have several cards, they will usually give the standard answers that they are building a good credit score, earning different types of rewards or making it easy to purchase items for the business.
But are those reasons good enough? No, they are actually reasons why you should only have one credit card for your business.
Still need convincing? Let’s go into more detail.
Lower That Red Flag
When you apply for different credit cards, a red flag is raised on your credit report.
It can look suspicious to some creditors, causing them to think you may be in financial difficulty and need to borrow your way out of it or that you are going to commit fraud.
It is recommended to check your credit report frequently to make sure your credit history doesn’t throw up any red flags that could negatively affect your chances of obtaining credit or loans (both business or personal).
While neither of these may be the case, when you make inquiries about obtaining multiple credit cards, your credit and financial history is looked at more closely than you might realize, which could lead to a reduction in your credit rating.
With one card only in your possession, you are keeping things nice and simple for the credit companies and they are less likely to seek out the deepest darkest secrets in your past.
Almost every credit card known to man has an annual fee attached to it. The annual fee is charged regardless of whether you use the card or not.
Some fees can be over $100 depending on the type of card you choose. Credit cards which offer rewards generally have a higher yearly fee to help offset the cost of giving away freebies.
Cards which are not rewards based have a smaller annual fee. When you have only one business credit card, you are already saving money by only having to pay one annual fee.
Some credit cards offer a points based rewards system where the more you spend, the more points you earn.
These points can be ‘cashed in’ for a variety of rewards such as travel, goods and services.
By having multiple credit cards you are spreading your point building ability thinly, increasing the time you will have to wait before you can claim any rewards. Using only one card enables you to increase your points balance and get rewards quickly.
Credit cards are a form of cash advance. You are buying without having to part with the cash until later.
But like money, they too can be stolen. Having multiple cards which you have to keep tabs on, increases the likelihood of credit card theft occurring.
This could be physical theft of the card, somebody retaining a copy of the card number for illegal uses or unauthorized purchases where one of your staff members uses a work credit card for personal use.
Former Congresswoman Melissa Bean said,
“Credit card numbers aren’t just data. In the wrong hands they can wipe out someone’s life savings, wreck their credit and cause financial ruin.”
Having one card puts you in a better position to know the exact physical location of the card and who has it.
It is easy to check purchases too as you only need to check one monthly statement.
Fuss Free Record Keeping
Credit card billing statements are a wonderful way of keeping track of all your business expenses. This is because card statements give a paper trail of when, where and how much was spent during a transaction.
Having multiple cards makes this a tricky process, especially if cards are used to pay off other cards by ‘robbing Peter to pay Paul’.
However, by only having one business credit card you will make your monthly bookkeeping easier and quicker to complete. You could even end up saving money on accountant’s fees as they would not need to search for information from different sources.
Using multiple credit cards for business expenses can be very costly.
Are you sure you are not paying more than you need to? Having multiple cards makes it harder to keep track of what is being spent, especially if different staff members have their own cards.
Who is to stop duplicate items being purchased, bills being paid twice or more business lunches being eaten than necessary?
Having one card with one responsible person reduces the amount of wasteful or unnecessary spending. They will be able to keep tabs on who has it and what they are using it for.
Unless you have a very large business or are willing to take unnecessary financial risks, it is wise to only have one credit card for your business to use and check or repair your credit history once or twice a year.
After all, everything that is purchased using a credit card needs to be paid back and nobody wants to hand over hard earned money if it could have been avoided.
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