Financial Freedom Tips

Archive for March 16th, 2010

The first thrill about starting a new enterprise is seeing the study of your creation on a business card. You want to hand them out to everyone you see — friends, family, the kid who bags your groceries. Soon after you’ve registered your trade name, the credit card offers begin cluttering your mailbox. It’s flattering at first. You envision going out to dinner, grabbing the check, and saying, “it’s okay, it’s on the company. ” So you fill out one or two “pre-approved” applications and, like your business card, can’t move to use this tiny symbol of acknowledgement. A corporate card tells people you’ve arrived. You’re a legitimate business.

But it can also spell trouble.

The purpose of a business credit card is to have the convenience of charging legitimate business expenses. You refrain using a individualized credit card and submitting receipts for reimbursement. You have the capability of making online and telephone buys to expedite shipment. The revolving statement helps you plan your cash flow. The statements wage a detailed record-keeping record.

Used wisely, a business credit card provides these important benefits and is essential to building your corporate credit profile. Demonstrating reasonable usage and maintaining a good payment history not only grants you to acquire more credit, but also helps you negotiate superior interest rates on loans, lines of credit, and other revolving accounts. In fact, using a credit card properly is superior than paying cash because lenders want to see a credit profile with positive activity. One small business owner had been vigilant about paying cash for all his buys to refrain having monthly bills. He had had some individualized credit issues in the past and was determined to refrain a recurrence. He felt great about keeping his costs under control. When the owner applied for a business loan at the local bank, he was advised that the black marks on his profile were minor. The biggest problem was that he had no current credit history. So, he got a credit card, budgeted a monthly allowance for the payment, and prefabricated small buys to establish reports on his credit profile.

A business credit statement is clearly valuable for a lot of functions. What it isn’t is a license to spend without regard to the consequences. Just because you’re not writing a check doesn’t mean you haven’t spent corporate cash. By following some basic guidelines, you can manage your corporate credit card statement so you reap the rewards instead of paying the price.

* Get credit from your own bank. Once you establish a business banking relationship with a local financial institution, continue to grow that relationship by applying for your business credit card at the same place. The more business you do with this bank, the more they get to know you. The comfort level increases the likelihood that they will think about your request for funding when the time arises. Show loyalty to them and it will be repaid in kind.

* Read the fine print. Many credit card companies shout out low introductory rates. The key word here is “introductory. ” After the honeymoon period is over, the rate can shoot up above the interest you’re paying on your current card. There might be hidden fees that can demolition up the bottom line on your monthly statement. Look for an annual fee, the first sign that this card is going to cost you money. If you have to pay for the privilege of having the card, chances are you don’t need it. There are various other features that you do want: overdraft protection, 24-hour customer service, and detailed statement reports for your business. In the long run, these services are far more important business benefits than frequent flyer miles or discounts on rental automobiles that are often accompanied by numerous restrictions of their own.

* Find a card and stick with it. With all the offers of lower interest rates and appealing incentives, you might be tempted to switch your statement from one issuer to another. Unless you are dissatisfied with your credit card company, stay put. Card hopping shows up on your credit profile and will likely be unimpressive to a prospective lender. Use your valuable time to manage your business instead of pitting one credit card company against another.

* Do not mix business with pleasure. A business credit card is intended for business buys only. In the event of an IRS audit —†and they do occur via random selection — questionable expenses will raise suspicion.

* You don’t need a deck of cards. You shouldn’t require more than one or two major credit cards for your business. The more credit cards you accumulate, the higher your debt potential. You charge a hundred dollars at the office supply store, then charge personal equipment with another account, and maybe pay for gas, meals, and a nice tiny antique plateau for your conference room on your corporate bank card. There’s still room on apiece card, so you’re okay. But when the monthly bills come, the totals come as a surprise. You can only make a minimum payment so the finance charges will begin to kick in. By keeping track of the expenses as you make them you won’t heap up a debt that puts a stranglehold on your accounts payables. Whenever you take that card out of your wallet, ask yourself if the buy is necessary and valid for the company.

* A credit card is not a loan. The statement should not be viewed as a source of funding when cash flow is tight. The interest rates and transaction fees are too high! Avoid taking advantage of the cash advance option. If you are resorting to borrowing from your credit card, chances are you’re not going to be healthy to pay the bill when it comes due.

* Limit the number of users. A company credit card is as much a demonstration of trust as it is a convenience for the user. The record-keeping for multiple cards can be a nightmare, however. Before applying for a card, make sure you can get itemized reports for apiece card so your frustrated bookkeeper doesn’t have to chase down people to refer charges. To refrain excesses, specify to the employee how much and what type of charges will be acceptable. Review the monthly statements to verify that the cards are being use appropriately.

A business credit card is an essential tool to manage your finances and get the items you need on a timely basis. In order to take full advantage of the benefits, select your credit card company wisely, making sure you comprehend the services and the limitations. Be clear about how the card will be used. Credit cards follow a basic law of physics: for each action (a purchase) there is an equal and opposite reaction (a bill). By getting proactive about the company credit card, you can keep your finances in balance, boost your credit profile, and enjoy a terrific convenience.

It used to be that parents didn’t find themselves considering credit cards for their kids until those kids went off to college, but nowadays a high school student credit card might be more appropriate. If you have a high school student at home and you’ve been wondering if a credit card might be a good tool for them, there are three things you need to keep in mind.

1. It’s a “Minor” Issue

If your child waits till college to get a credit card, chances are it’s going to be in his or her study only — meaning your credit is off the hook should they mismanage the card or abuse their credit. If, however, your child is a minor (as most high school students are) then your child is going to need to be using one of your credit cards as a secondary user. This means your credit is on the line, not theirs.

Minors can’t get their own cards, so you’ll be towing the line if your child is under 18 with a credit card in their pocket. If your child isn’t responsible enough to manage the card wisely, you’ll end up paying for their mistakes, and those mistakes can cost huge time.

2. It’s All About Boundaries

If you do decide to let your child have a high school student credit card, you need to set up boundaries the moment that card is issued. What can the card be used for? How much is your child granted to spend? Should he or she contact you for permission prior to using the card?

By setting up clear boundaries you can refrain future headaches (and unpleasant statement surprises). If you simply state “this card is only for emergencies” your child might not understand. For all you know, that adorable coat in the mall could be an emergency to a high schools student. Explain exactly what constitutes an emergency and set up firm rules, making sure your child comprehends what the consequences will be if those rules are broken.

3. Go Over the Statements Together

A high school student credit card can be a great way to instruct your child financial responsibility, but for that to happen your child has to be involved in paying the bill. When the credit card statements come in apiece month, go over them with your child. If there are frivolous charges, discuss them and speak about responsible credit card spending.

Let your child watch you write the check to the credit card company and make sure they pay you for their share of the bill. This will instruct them that plastic needs to be used just as responsibly as cash.

While a credit card isn’t right for each high school student, there are definitely some who can benefit from them. If yours is one of them, by all means get them started on the road to a healthy credit future and let them learn from the use of a high school student credit card.