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7 ways to use your credit card as a business tool

Without having to drown in debt and interest
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Stories of people getting into a debt quagmire after using (or abusing!) their credit cards abound. There are also entrepreneurs, however, who successfully use “plastic money” to bankroll their businesses.

Here are tips from certified public accountant and entrepreneur Grace M. Perez on how the credit card can be used as an effective business tool.

1. Take advantage of zero-percent installment promotions.
Most personal credit-card issuers offer zero-percent installment promotions, allowing you to buy high-ticket items at select appliance and gadget stores at no interest and in different payment terms. Use can use installment plans to acquire office computers, cellular phones and other gadgets, as well as office furniture.

2. Use the continuous-billing facility.
Most credit cards offer a plan for cardholders to enroll their utilities and other accounts—electricity charges, telephone bills, insurance, among others—for continuous billing, charging and payment. This frees you from the hassle of monitoring several due dates. With the continuous billing facility, you have to remember only one due date, that of your credit card.

3. Pay the total amount due on or before the due date.
The regular credit card allows a cardholder three payment options—pay the total amount due (TAD), pay the minimum amount due (MAD), or pay an amount more than the MAD but less than the TAD. In any case, you must make the payment on or before the due date stated in the statement of account (SOA) for you to stay in good standing. If you pay an amount that is less than TAD, you become a borrower and would be charged an interest of 2.5 to 3.75 percent a month, depending on the credit card issuer. If you pay after the due date, you’d have to pay a late payment fee.

4. Maximize the float period.
Take note of the cut-off date of your credit card so that you could time your purchases and achieve better cash flow. Let’s say your credit card’s cut-off date is the 31st of every month. This means that your purchases for the period of for instance January 1 to 31 would be reflected on your statement of account for January 21. The payment due date is usually 21 days after the cut-off date or February 21. The number of days from the time you made the purchase to the time you paid it is called the float period.

A purchase made on January 30 would be reflected on your January 31 SOA, and you need to pay it on or before February 21, giving you a float period of 22 days. However, if you wait two more days, or until February 1, before making the purchase, it would only appear in your February 28 SOA. You would then have until March 31 to pay for the purchase, or a float period of 48 days! By timing your credit card purchases well, you could effectively delay your cash outflow.

5. Ask for a waiver of fees or an increase in the credit limit.
Credit-card issuers charge annual fees to cover their operational costs in servicing cardholders. In some instances, however, they may consider waiving the annual fees on your account if you are a good payer, if you have been a long-time cardholder, or if you frequently use your card.

6. You can use your credit card for operational expenses. 
You may use your credit card for operational expenses such as utilities, gasoline, representation, office supplies and vehicle repairs--as long as you are a diligent payer. Your credit card billing statement can then serve as a tool to analyze your expenses and cash flow requirements.

7.  Make use of the cash advance or cash loan facility.
A regular feature of a personal credit card is the cash advance facility. When getting a cash advance, however, you will be charged an upfront cash advance fee ranging from 3 to 6 percent of the cash advance amount, or a fixed amount, whichever is higher. Credit-card issuers also offer cash loans—you are given cash that must be paid back in equal monthly installments, ranging from three to 24 months with add-on interest. Since these involve fees and interest charges, carefully assess your situation before availing of them. If you have several credit cards, compare their rates and terms and choose the most advantageous for you.

Remember though that having a credit card does not mean having extra money to spend. You need to have the cash to pay your bill come due date. Credit cards can be an effective business tool—the key is knowing how to manage them well.

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