Tips for Construction Businesses: Use Credit Cards Carefully

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By CraigNewby

Best credit card for construction business can benefit from credit cards. Credit cards can be used to fund expansions or new jobs. Many cards offer points or cashback for purchases made by businesses. Some cards offer promotional rates as low at zero percent. This is clearly less than what you would get from a bank for a personal loan.

Credit cards are not just about paying your monthly balance. There is more to credit cards. These tips will help you to understand how to use credit cards to grow and sustain your business.

Spend money that you don’t need

This is the best rule of thumb when it comes to credit cards, personal or business. While credit cards can increase your purchasing power, it is not wise for construction companies to use them for the money they already spend.

You should be able to afford your monthly overheads. You can earn cash back, points, rewards, discounts and rewards with a credit card if that is the case. You can use your credit card to make the purchase, and then you can pay the balance with the cash in the account.

Factor interest charge into your estimate

This is the silver rule. You must factor in the interest that you will be paying if you are using a credit card to estimate your project. This is something that many new or small contractors forget to consider. It can hinder their growth.

Maximizing your profit should be your goal. Cash flow and profit, however, are different. The job will not be as profitable if you don’t include interest in the estimate. This is regardless of the progress payments.

The payment schedule will help you plan your credit card usage.

You should plan your credit card usage according to the payment schedule if you want to really leverage it. This requires careful planning.

Credit card companies typically offer grace periods of between 21 and 25 business days during which purchases do not accrue interest. The grace period runs from the date your monthly statement is received until the due date of your payment.

Enjoy the benefits

Although no one loves to pay interest, there are times when a credit card is more practical than cash.

Numerous credit card companies offer special rates for the first time you open a new card. These rates often start at zero percent within the first few months. It might be a good idea to buy equipment or materials with a zero percent rate offer. You can bank the cash each month and earn positive interest. Then you can pay off the whole amount before the promotion ends.

There may be discounts available at certain retailers. For example, opening a Lowe’s business credit card gives you a 5 percent discount for every purchase. This can save you significant money over the life of a project. You can either pay the entire balance within the grace period or you can say goodbye to the discount after the first interest accrual.

Transfer the balance

While it is true that you will not be able to transfer your credit card balance if you use the golden rule of credit cards usage, we are realistic. Sometimes things happen. You might be stuck with unpaid bills because of difficult customers or job problems. Sometimes it’s impossible to pay off your balance within 25 days or the promotional period.

You might open another card and transfer your balances to it if you are facing an interest rate that is going to hurt your profit margin. Many times, you can get promotional interest rates as low at zero percent for a period of time. This could allow you to control your cash flow and pay off your balance.

Protect your lien rights

This rule is the only one you should follow.

Sending a preliminary notice for each project is the first step in protecting your payments. A preliminary notice can help you preserve your lien rights in many states. They can be used to introduce the check-cutters by serving as a paper notice.