Business credit cards can be great ways to manage business expenses and earn rewards for business spending. However, business credit card debt quickly becomes unmanageable if you are not careful. If you are struggling to pay down business credit card debt, here are four strategies that may help:
1. Use Your Business Credit Card Only for Business Expenses
If you use your business credit card for personal expenses, you are likely racking up more debt than you can afford to pay off. Try to use your business credit card only for business expenses such as office supplies, inventory, or travel. This helps you keep track of your business spending and avoid racking up unnecessary debt.
As a small business owner, you must keep a close eye on every penny you are spending. Also, opt for business credit cards that integrate with your accounting tools to help you identify areas where you are spending too much and make adjustments to your budget accordingly. Capital on Tap offers a great business credit card that helps run your small business easier.
2. Pay More Than the Minimum Balance
Minimum payments on business credit cards can be low, which make it tempting to only make the minimum payments each month. However, this only prolongs the repayment process, and you end up paying more in interest over time. Try to pay more than the minimum balance each month to help reduce your debt faster.
Even with so many business expenses to handle, setting aside some extra money each month on top of your minimum monthly payment to put towards your business credit card debt is important. You may need to cut back on other expenses in order to make this happen, but it will be worth it in the long run. You will not only clear your debt quicker this way, but you will also save on interest.
3. Automate Your Business Credit Card Payments
Another way to stay on top of your business credit card debt is to automate your payments. This way, you will not have to worry about remembering to pay your bill each month. Moreover, you can ensure your debt is being paid down without having to think about it too much. Paying your business credit card bill on time is crucial to maintaining a good credit score.
Missing even one payment can damage your credit score and make it difficult to get approved for new business loans or lines of credit in the future. You can automate your business credit card payments by setting up automatic transfers from your business bank account to your credit card issuer.
4. Use a Debt Snowball or Debt Avalanche Strategy
If you need help getting motivated to pay down your debt, try using the debt snowball or debt avalanche method. Using the debt snowball strategy, your goal is to focus on paying off your smallest balance first while making minimum payments on your other debts. Once your smallest balance is paid off, you move on to paying off your next smallest balance, and so on.
The debt avalanche strategy is similar but focuses on paying off your debt with the highest interest rate as a priority. Both of these methods help you pay down your debt more quickly and save money on interest charges. With a little effort and discipline, you can get your business credit card debt under control and use it to help your business thrive by injecting the extra working capital you need.
Take Advantage of Business Credit Card Benefits
Most business credit cards offer rewards programs that help you offset the cost of your debt. For example, with Capital on Tap’s business credit card, you can enjoy unlimited free 1.5% cashback, get $200 back if you spend $15k in your first 3 months, and redeem reward points for gift cards at a 2% discount from your favorite brands. These include AirBnB, Amazon, Apple, Uber, a number of airlines, and more. The goal is to get the most value from your business credit card.
Final Comments
Managing business credit card debt does not have to be a daunting task. By following these tips and strategies, you can effectively manage your debt and keep your business thriving. While doing so, ensure you are also diversifying your business credit portfolio to create a strong foundation for future growth.
