Use of the right business credit cards can be a great way for small business owners to grow their companies and to improve credit scores as well. However, if a business or company is not doing so properly, credit cards can create abnormal financial troubles for them. In this way, this handy financial tool can become a liability for businesses.

As a small business owner, you can easily turn the benefits of credit cards for business into drawbacks if you are not using the credit cards in right way.

Here are the common small business credit card mistakes to avoid if you really want to build credit for your business instead of running it.

Choosing the wrong credit card for business

Always keep in mind that not all credit cards are suitable for business use as they are not created equal. Personal and business credit cards are two different things and also offer different benefits accordingly. Choosing the wrong credit card for business can be one of the biggest small business credit card mistakes to avoid as it can have a bad impact on your business’s credit score.

It is also bad for your business if you are using your personal credit card to pay business costs and expenses as it won’t help you achieve the business related financial goals. Sticking with the suitable business credit card options is the great way to manage your business finances brilliantly.

Using debit card as credit card to pay business costs

If you are thinking that using a debit card is reasonable choice to pay business related costs in order to avoid business debt in terms of credit card bills, you are making the totally wrong decision that can harm your business credit scores. When using a business credit card to pay your bills and other business related expenses, they offer full protection in the case of billing disputes and fraudulent activities that a debit card cannot offer. Use of business credit card is always better option for businesses as they help build business credit to secure business loan easily in future if needed.

Not having a proper spending plan

If you don’t have a proper business spending plan on hand, you are more likely to spend more on unnecessary business costs with your new shiny and high limit business credit card that can increase business debt instead of getting the business finances on right track. That’s why, unavailability of a proper spending plan is considered as one of the small business credit card mistakes that should be avoided immediately by building a productive business spending plan or budget.

Investing in your small business is definitely a good thing for its positive growth but if you’re spending without a plan, you are setting yourself up for an abnormal financial trouble in near future.

Mixing the business and personal spending together

You have to keep your personal and business related spending separate if you really want to take advantages of business credit cards. If you (as a small business owner) are failing to do so, be ready to face a headache when it will come to file the tax return. On another hand, spending business money for personal use via business credit card will definitely raise your business debt that can have a bad impact on business credit score.

Not applying for business credit cards with annual fees

Not applying for small business credit cards with annual fees is one of the biggest mistakes your business should avoid when paying business costs via business credit cards. Business credit cards with annual fees are always beneficial for businesses as they usually offer a big number of benefits like lower interest rates, higher credit limits and so on. Almost all businesses can apply for instant approval credit cards with annual fee plan in order to keep business finances on track.

Using credit cards that report to your personal credit

As a small business owner if your personal credit score is most important to you due to some reasons, you should avoid using the business credit cards that report to your personal credit scores.  If you carry a high balance on your personal credit card even if you pay that balance off in time, the chances are higher that it will still have a bad effect on your overall utilization rate on business credit card by lowering your credit scores. Always apply for business credits cards that do not have any connection to your personal credit score.

Not using the business credit card to pay large bills

Most of small businesses think that they may need to pay something extra when making large payments via business credit cards. It is totally wrong concept, even most of business credit cards offer you bigger reward points on making large business payments. Hence, you should make things clear by talking with your bank or credit card issuer as sometimes it may bring upon yourself a 3% credit card processing fee when paying large amounts.