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Credit Cards

There are two topics to consider concerning credit cards: using and accepting them.

Using a Business Credit Card

As an alternative to paying by cash or check, consider getting a credit card in your business's name. Some credit card issuers offer rewards programs to the holders of business cards as well as to individuals. The best are "cash back" rewards where a given percentage of your annual purchases are paid back to you. Thus, paying for supplies and services (where you can) with such a credit card can cut your effective costs by 1% or more (the amount of the cash back reward) versus paying by check.

Look for cards that offer no annual fees. Also look for cards that allow linkage to a bank account, automatically sweeping payments on the due date so that you avoid interest charges on unpaid balances.

Accepting Credit Cards

On the flip side, you must decide whether to accept payment by credit card from your customers. Accepting credit cards has its advantages (you don't have to make change, keep cash on hand, make cash deposits, deal with bounced checks, and many customers find credit cards a convenient method of payment) that may attract more business in the long run. However, on the downside, you must give up a percentage of the sale to the credit card company (called the transaction fee), have credit card processing equipment, and worry about charge disputes.

In the best of all worlds, all your revenues will come via cash, and all your expenses will be charged to a cash back, no fee credit card.

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