The National Small Business Association’s 2017 report found that 31 percent of all small business owners used a business credit card at times for business expenses. When you have some leeway left on your business credit card in terms of your available balance, it may be tempting to go ahead and charge marketing expenses on your card. Depending upon the situation, that may either be a boon to your business or not a very good idea.

At Grand Canyon Advisors, we field calls from small business owners who are seeking advice on credit and debt issues. The following is some general guidance on when using your business or personal credit card makes sense or not.

Personal Versus Business Credit Card

The Federal Reserve Bank of Philadelphia conducted a study of small business owners and found that they were using both personal and business credit cards to finance their enterprise. With either a business or a personal credit card, Forbes Magazine reports that a small business owner will be personally liable for the debts they charge for business uses. This is because most business credit cards have the owner sign a personal liability clause. If you default on the card, it can harm your personal credit score.

Also, Forbes reported that business credit cards carry fewer protections than consumer credit cards. If the issuer chooses to, they can raise the interest rate on your card at any time without warning.

High-Interest Rates

The Balance reported that the average interest rate on a business credit card in October 2019 is just under 20 percent. The average interest rate on personal credit cards is just under 22 percent. These rates often get people into a perpetual cycle of mostly paying interest, with little going to pay off the balance each month. That may be the idea. You just end up servicing high-interest payments month after month, harming your cash flow.

When It Is a Good Idea to Use Your Credit Card to Pay for Marketing Expenses

Both business and personal credit cards can have great perks, like cashback bonuses and airline miles. If you know you will be able to pay off the balance at the end of the month, it makes sense to charge a business expense and get a discount on the purchase in the form of a cash-back bonus.

Also, if you only use your business or personal credit card when you know you can pay off the balance with the next payment, it helps improve either your business or personal credit score.

If You Get Over-Extended –

With all of the financial upheaval of the past decade, it is easy for a small business owner to have had to use their credit cards a bit too much and end up with high-interest debt to service each month. If that happens, it is important to either pay down the balance immediately, if possible or to reduce your interest rate.

Two of the best ways to reduce your interest rate on your high-interest credit card debt are:

Zero-interest, balance transfer credit cards: These are great when you know that a 12- to 18-month reprieve on servicing the interest will allow you to pay down the balance.

If you have questions about small business debt, call Grand Canyon Advisors. We have solutions for small business owners struggline with debt issues