House of Cards

Credit cards can be a valuable tool for the entrepreneur or business owner - or they can be a real bane, quickly putting a dent in a company's financial future. Richard D'Ambrosio, spokesman for American Express Small Business Services, says the key to not getting into trouble is proper planning. "Don't apply for a credit card without a business plan," says D'Ambrosio. "People look at credit cards and don't see it's like getting a loan from a bank."

In the February, 1998 issue of Inc., Phaedra Hise looks at why credit cards are now among the most common small-business financing tools in her article "Don't Start a Business Without One." Here, we present 10 tips on how to head off potential problems once you do have one.

1. Keep business and personal cards separate
Using consumer cards for business expenses is a risky proposition and one that can end up ruining your personal credit. Don't mix business and pleasure - keep company expenditures on a corporate card or at least a consumer card earmarked only for that purpose. It's more professional and helps keep business debt off your own record with the credit bureaus.

2. Resist the allure - don't get too many credit cards
Many business owners dive right in and get as many cards and as much credit as they can at the beginning. But it's possible to have too much of a good thing. Consider consolidating a portfolio of plastic onto one or two corporate cards to make it easy to track company expenses, pinpoint spending trends, and help with tax planning. You can also pay closer attention to interest rates and fees when you carry fewer cards.

3. Know your credit history
Get a copy of your credit report before you apply for your next card. Why? Your credit history is what companies use to decide who gets a card and - more importantly - at what interest rate. "It's important to know your credit history so that when you apply you can get the rate you deserve," said D'Ambrosio. Credit-card companies often reserve the right to charge you a higher rate or offer you a lower credit line than what they advertise depending on your rating, so it pays to make sure your report is accurate and up-to-date. Credit bureaus Equifax (800-685-1111), Trans Union Corp. (800-888-4213), or Experian (formerly TRW, 888-397-3742) can send you a copy of your credit history. Fees vary; reports are free under certain conditions.

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