Small-business credit cards can be powerful tools to help entrepreneurs secure growth capital and improve their bottom lines. But using credit cards the right way is crucial to set your business up for success, and choosing the right card is an important first step. (Check out our picks of the best small business credit cards for a few of our favorites.)
In the video segment below, The Motley Fool analysts Nathan Hamilton and Michael Douglass talk about three smart ways for entrepreneurs to use credit cards, including tips on how to earn more rewards and free up time to manage daily operations.
Michael Douglass: Let's talk about some of the best ways to use your small business credit cards, if you have one. It's interesting because when we were talking about this before we started filming, it reminded me a lot of what you kind of do with your personal credit card too. So, when the big ones is you've used the term 'Swiss army knife-style perks' a lot and that's essentially stuff that you can apply rewards to a lot of different spending categories.
Nathan Hamilton: Yeah, if you think about it and why this is important for entrepreneurs and business credit cards is, if you think about how many things an entrepreneur is juggling when starting up a business, running a business, whatever. If it's firing on all cylinders and growing, there are too many things to take care of. So, managing your credit cards ... at least, I think, should be somewhat simplified and that can be done with, essentially, one credit card that is a Swiss army knife-style rewards, perks, for all sorts of credit card needs.
That means a good sign-up bonus, a good APR, good perks in terms of rewards, access to travel. All these sort of things, and looking and just finding one card that will fit the majority of your needs, because you can go out there and get 10 different credit cards ... use one for this type of purchase, get the bonus on this one, use this for other types of purchases, do this for the other one ... but it's very complex to manage.
Douglass: And really when you think about it, if you're managing a growing business, your real opportunity is to build those growth levers as opposed ... things that give you the chance to boost revenue by 10% or 20% or 30%, as opposed to managing all these credit cards so that you can get an extra half percentage point or 1 percentage point cashback total. I mean, just the different in terms of what that's gonna do for your business and, hopefully, your salary, one day, is a lot more substantial. So, it's kind of applying your biggest levers to your biggest opportunities. Optimizing your credit card spending perfectly usually isn't one of those, if you can get something kind of does like 80% of the work for you.
Hamilton: Yeah. Unless you've got a staff of accountants that are able to handle those expenses for you.
Douglass: Right. And which-
Hamilton: Which for many entrepreneurs starting out is not the case.
Douglass: Right. You may not be a particularly small business if that's the case.
Douglass: Let's also talk about providing employers with a card. This one kind of surprised me, because usually you think about wanting to make sure that you're controlling everything, but, of course, the key caveat here is, "Trusted."
Hamilton: Provide trusted employees with a credit card, because if you think about it, your right hand man, woman, whatever, is going to be taking responsibilities for a lot of the different aspects of the business. Be it office supply purchases, advertising ... wearing all sorts of different hats. So, when your earning rewards, you want to make sure that you're earning rewards for every purchase possible and whatever makes that easy to do will make sense. And with many business credit cards, you can get an additional card, two, three, four, for employees at no additional charge. So, it is something definitely to consider, with the caveat trusted employees, because you're on the hook for those charges.
Douglass: Right, and the third thing is kind of a caveat to what we've been talking about previously, which is placing your entire travel purchases on credit and that often implies a card with really good travel rewards.
Hamilton: Sure. Yeah. And the caveat there is, as well, is entire.
Hamilton: Because to get the benefits of a travel card ... you'll get the rewards for it based upon what you spend, but to get the real benefits that come into place when you're not expecting it ... be it travel insurance, luggage, lost luggage insurance ... those only apply if you place that entire purchase on the credit card. So, it's really important to pay attention to that fact.
Douglass: Yeah. Absolutely. Yeah, and we've got a lot more information about business credit cards and sort of thinking through tactically what those opportunities at fool.com/businesscreditcards. So, check us out there.