Should I Make Large Purchases With My Business Credit Card?

Obtaining a credit card is a necessity for small business owners like D.Cs.  Business credit cards provide a means to keep personal and business expenses separate.  Doctors tend to use their business credit card to pay for everyday business expenses like office supplies, lower-priced equipment, monthly services, entertainment tied to business and so on.

Posted in Money & Credit on Saturday, October 15, 2016

While it isn’t typical to pay for higher-priced items like equipment with your business card, it can make sense in certain situations.

For example, let’s say you’ve been in practice for 5 years or longer and have a small asset to debt ratio (allowing you to obtain a higher credit limit) and you’re earning good income from your practice.  You come across a low introductory offer from a reputable card issuer and consider using your card to buy $4,000 worth of furniture with the goal of paying it off prior to the expiration date of the offer.

You do your research and determine the card issuer is reputable, there’s a sign up bonus tied to the offer and an opportunity to earn on-going rewards with the card.

If you're comfortable with your cash flow situation you might consider this.  It would allow you to receive the bonus points and any rewards credited for that purchase.  Even then, you have to be extremely careful.  Depending on the card issuer and offer, the risks involved with this decision are high.

For example, if something unforeseen happens to your business cashflow that makes it hard to pay off the balance prior to the expiration date of the introductory offer it can end up costing you.

Banks typically charge a much higher on-going annual percentage rate (up to 30%) and may charge this retroactively to the date of the first purchase.  Also, the majority of business cards come with annual fees of up to $100 or more.  This is typically charged at some point after your card is issued--sometimes on the first statement.

You should be careful that costs associated with the card offer don't exceed its benefits.

Having said this, making large purchases below $5,000 with your business credit card can make sense.  When considering purchases such as equipment that's over $5,000 you should determine if it's better to pay cash or finance it.  Either way, we recommend you examine all credit offers, rates and fees closely before deciding.

We invite you to review NCMIC’s MilesAway® rewards-based business credit card that offers low introductory and on-going rates.