Credit cards are truly great financial tools. Not only do they help you establish a presence in the credit community, but they allow you to make necessary purchases when you don’t have the funds on hand. This can come in extremely handy for small and large businesses alike. While a company credit card might make it easier for you to manage expenses and track accounting expenditures, they certainly don’t come without their downsides. If they are not carefully looked after or monitored, you could end up in a major world of hurt. Below, you will discover some of the advantage and disadvantages of owning company credit cards.
It can be extremely difficult to secure a loan in today economy. Many banks and lenders are extremely cautious about the entities that they
Easy And Quick Financing
It is not uncommon for the small business owner to find himself or herself in need of cash. And, when they need that cash they usually need it right away. Whether it is to pay a late overdue bill or to cover supplies for this month, a business credit card can offer the quick release that you need. You don’t have to wait weeks at a time to see if your loan is going to be approved by a judgmental bank or lender. Instead, the credit card will offer the quick funds that you need to cover any payment.
Late Payments Are Serious
The biggest downside that comes with business credit cards is that the late payments can be brutal. Whether you have late payments on your credit report or you are paying late payments out of pocket, they are going to cost you immensely. When you overspend or use your credit card because you don’t have the funds, you are just basically trading one debt for another debt. What good does this really do you? You owed your supplier paid him off, but now you owe your credit card company because you didn’t have the cash on hand to pay that vendor out of pocket. With this kind of thought process, you are just basically delaying the inevitable.
Financing Is High
When it is all said and done the biggest disadvantage of business credit cards is that they come attached with extremely high-interest rates. Not only are the late fees high, but just the fact that you own the card is going to cost you. The annual fees for possessing these cards could potentially run your small business into the ground.
They Are Uncontrollable
Most people make the assumption that a small business is just a one or two-man operation. Unfortunately, that is not always the case. A small business can consist of anywhere from five to ten employees. And, if these employees are on the road they are going to come across unexpected expenses. Sure, giving your employees a business credit card to cover these expenses can be a great solution, but it also poses a huge problem. There is no way for you to approve or deny these expenses. If your employee goes into a store and charges hundreds of dollars worth of unexpected expenses that you don’t have the revenue to cover what are you going to do?
You would be left to deal with the fallout of late payments and higher interest rates, which would be extremely troubling to your businesses’ financial state.
With all the available technology in the world scammers and hackers are becoming more and more sophicasted. In fact, you have probably read about the recent credit card skimmer attacks that claimed thousands of dollars from Target customers. Well, is it impossible to think that the same thing could happen to your company?
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