This article contains general information and is not intended to provide information that is specific to American Express, or its products and services. Similar products and services offered by different companies will have different features and you should always read about product details before acquiring any financial product.
Part of running a successful business may mean knowing how to sustain your operation and help it thrive. Keeping tabs on your spending can get a little complicated if you have multiple business expenses to track.
How can using a credit card help you manage your finances?
A credit card can help smooth cash-flow gaps and act as a business expense tracker. But first, consider deciding which expenses to charge to your card which can help you see the card that may work best for your business.
Key takeaways:
Tracking individual expense categories can help clarify how your business spends money.
Credit cards can help simplify expense tracking, though it can be important to know when and when not to use them.
Choosing the right card can start with understanding how your business spends and what type of benefits or features you prefer.
Types of Business Expenses
Business expense credit cards are designed to help you cover a variety of situations. But what is an example of a business expense?
If you have expenses you pay regularly, charging them to a credit card may help ensure they're paid on time. It can also be a way to help reserve additional cash flow throughout the month.
Some common business expense categories can include:
Travel expenses
Business meals and entertainment
Utilities
Advertising
Shipping
Mileage, fuel costs, and vehicle maintenance
Business insurance
Office supplies
Inventory and raw materials
Identifying your most frequently used expense categories may help you narrow down the options when choosing a business expense credit card.
Types of Credit Cards for Business
Credit cards for business aren't all alike and you may want to know how they compare. For instance, business credit cards and corporate cards aren't the same.
Business credit cards can meet the needs of small-business owners, including sole proprietors and independent contractors. These cards may earn rewards and include expense tracking tools.
Corporate cards can be geared toward larger businesses which may generate significant revenues and have numerous employees. These cards may earn rewards and include cash management or business expense tracker tools.
If you run a smaller business with just a few employees or you're a sole proprietor, you might ask if you can get a business credit card for work expenses. The answer may be yes, but it can depend on your circumstances.
For example, a business credit card may allow you to earn points, miles, or cash back on eligible purchases. It may make sense to choose a card that offers maximum rewards for the business expense categories you use the most.
Expenses You Can Pay With a Business Credit Card
Should you use a credit card for business expenses? The answer may be yes in some situations and no in others. Let's look at some examples.
Recurring payments. If you have expenses you pay regularly, charging them to a credit card may help ensure they're paid on time. It can also be a way to help reserve additional cash flow throughout the month. However, not all recurring payments may need to be charged to a credit card. Each credit card product is different, so make sure you look for the one with the features that work for your business.
Tracking expenses. Credit cards can help take the stress out of expense tracking, which can be helpful for budgeting. You can review your statements to see how your business expenses have changed.
Short-term expenses. A credit card may be handy when you have an emergency expense or need to fill a temporary gap in your budget. You can avoid interest if you're able to pay the balance in full.
Earning rewards. Rewards cards can help save your business money if you're earning back a percentage of what you spend in cash back, or collecting points, statement credits, or miles. Travel rewards cards may offer additional benefits.
When to Reconsider Using a Credit Card for Business Expenses
Are there situations where you might reconsider using a credit card for business expenses? Yes, including:
A new business launch. A credit card might be an accessible financing option if you're just getting started, but generating debt may strain your cash flow.
Large purchases. Charging a large purchase to a business credit card may be costly. You may want to consider using alternative financing, like a business line of credit instead, which can offer flexible financing.
Cash-flow struggles. If your business is already operating at a loss, you might consider not adding credit card debt.
You may also need to keep accurate records of what you spent and where. Credit cards for business expenses can give you access to expense tracking tools to help make that easier.
How Using a Business Credit Card Can Help Your Small Business
You want your business to thrive. When used strategically, credit cards could help you reach your goals.
Photo: Getty Images
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