Is it Wise to Charge My Home Business Expenses to My Personal Credit Card?
When you read testimonials of a few successful Internet entrepreneurs, it may be common to read that in their past they are "maxed out their credit cards". At this point, I can hear you thinking out loud, "but they made it anyway … and so can I". I wish that would be the case for every Tom, Dick, Harry and Sally, but the improper use of credit can be devastating to some not only for their personal businesses but it negatively pressures significant family relations as well.
So let's ask, "Is it wise to charge my home business expenses to my credit card?"
The answer to that question is, "It depends." You see, the use of the credit card can work either to the benefit or detriment of the one using it. The intelligent questions to ask are:
1. Do I have sufficient cash on hand to purchase this right now?
2. In my current capacity, can I afford to buy this right now? "
3. Why am I charging my credit card for this item?
Firstly, if you are personally "liquid" enough to purchase this item, and if you have set it as necessary for your business, then yes, it is wise to use your credit card if you will have the deduction to take the cash out of your reach, keep it someplace safe, (like in a savings account or piggy bank) until such time to settle your card statement comes.
Secondly, to say "you can afford to buy or purchase" an item means that you are not sacrificing any other basic needs of your family such as the grocery or utility bill budget. It means you really have a "surplus" tucked away someplace. It can also implying that if you are deferring a payment, you are absolutely certain of a cash inflow that will sustain this expenditure such as scheduled bonus or lumpsum to be received for sure. Otherwise, re-evaluate your position. If you can pay the FULL BALANCE in one payment, then yes – you can definitely afford it.
For those who choose to defer payments, credit card companies may impose a finance charge of as much as 3.5% a month for the revolving balance and that accumulates to about 42% a year! Compare that to the yield paid to you if you had a deposit, say 3% per annual, then you are spending so much in finance charges and your business has not even taken off yet. Perhaps interest rates, are of a different level in your country, find out and compare. It pays to know!
Thirdly, there are other reasons to use credit cards. Convenience is usually the key reason, but it has its own responsibilities that go with it. Cashless transactions has its perks – no bulky bills to tug around or no risks that thieves will snatch them from you. But then, the same security mechanism we devote to our cash holdings should also be exercised for our credit cards. Because they too, may be swiped and stolen from us. So, we have to be vigilant.
And I almost forgot, most credit cards offer a reward system or points such as freebies, or cash-backs. That can also be a good reason to charge items to your card. The bottomline is, determine if you can afford to pay it – if you can, go ahead and charge it!