Paying for Business Expenses Applying for a business credit card is something a small business should seriously consider for itself. Business credit cards can provide a range of benefits to a business. They allow a company to build up credit for better borrowing conditions down the road. They’re also quite easy to apply for. In this article, we’ll go over how to apply for a business credit card and other important points to note. What Is a Business Credit Card? A business credit card is a credit card that is intended for business expenses. These cards are not meant for any individual’s personal use, but they are available to businesses of all sizes. What Is a Business Credit Card Used For? Business credit cards are meant for business expenses, and as such, they come with several perks that you wouldn’t get with a normal credit card. Business credit cards typically have far higher credit limits than normal cards, but they are also harder to qualify for. [youmaylike] As a business phenomenon, business credit cards vary their offers greatly, and certain cards are meant for certain businesses. They are also highly customizable when it comes to individual payment terms. Businesses don't always have consistent incomes like individuals do, and business credit cards handle this problem. These cards are used to gain access to a long line of credit, to control employee spending on business expenses and more. One of their other common uses is to make accounting easier, as putting all business expenses on one separate account makes reporting to the Internal Revenue Service easier. In the end, there are many uses for a business credit card. Why Would I Need a Business Credit Card? You might not need one, but if you run a business, you’ll be leaving money on the table by not at least looking into them. Business credit cards can solve many of the problems business owners face. If you need employees to make purchases for the business, a business credit card is the safest option. These cards can be given to authorized users, a status you can easily give to any of your employees. From here, these cards make it easy to monitor employee spending and spot any discrepancies. You can attach customized user privileges to each card to limit spending and place limits on where the card can be used. As mentioned, if you feel like your credit is too limited, business credit cards are a sure way around low credit. According to the American Bankers Association, the average monthly payment on a business credit card is twice as high as the average payment on a normal one. If you’ve found yourself annoyed with the Internal Revenue Service over the complicated reporting processes for business owners, you’re not alone. This is where a business credit card can solve another problem. Simply handing over your business credit card statements to your accountant will make them love you. It will also provide them with the information they need to predict future spending. Another great use for a business credit card is lifting your liability for debts. Liability for credit card debt is determined by the liability offered by the card. If you’re using a personal credit card for business expenses, you are liable for all debts. On the other hand, if you use a business credit card with commercial liability, your business is liable for any debts, which changes the game. Keep in mind that some cards offer joint liability, which leaves both you and your business liable for any debts. Make sure you know what you’re getting into before signing any paperwork. Lastly, just as personal credit cards offer rewards programs, so do business cards. The main difference here is that business credit card rewards are tailored to your business needs. How to Apply for a Business Credit Card Before you apply for a business credit card, you should make sure you’re eligible. For the most part, you only require the following to be able to apply for one: A legal name for your business. A business structure to apply with, such as a Limited Liability Corporation. An explanation of the nature of your business. You’ll typically be given a list of industry types to choose from. A tax ID number issued by the Internal Revenue Service Your roll in the business you’re representing Various business/financial information including: Annual revenue. Number of employees. Length of time in business. Estimated monthly expenses. If you have this information ready, you can apply for a business credit card. At this point, it would be wise to shop around and find the best option for your business. Your decision on the business credit card you choose will have larger ramifications than your choice of a personal credit card. Applying for a business credit card is much the same as applying for a personal one. There are a few differences, but the main thing to remember is that business credit cards are taken more seriously than normal ones, so you’ll have to face a higher bar of entry. This doesn’t mean getting a business credit card is hard, but it does mean you need to arrive more well-prepared than you normally would. To make things easier, you can prepare for certain obstacles in advance. You may need to sign a personal guarantee that you will pay off any debts. Also keep in mind that if you’re the one applying for a business credit card, and your business doesn’t already have one, they will conduct a personal credit check. It may be best to try to optimize your personal credit if you plan on applying for a business credit card in the future. Some Options at a Glance Here are some of the most popular options for small business credit cards: Chase Inc Business Preferred This is a great option for a few reasons. With the Business Preferred card from Chase Inc, you get 80,000 ultimate reward points when you spend $5,000 with the card in the first three months. The card also provides generic, but highly useful benefits for business owners. Business Platinum Card from American Express The Business Platinum is ideal for businesses that spend a lot on flights and travel. This card offers numerous rewards on flight and hotel expenses and makes sure you get something serious back if you use it for these expenses. Chase Inc Business Unlimited The Chase Inc Business Unlimited offers unlimited 1.5% cash back. While we’ve said enough already, they also offer several other perks that are overshadowed by their first one.
How Is Inflation Measured?
You probably already have a basic idea about what inflation is, but have you ever wanted to know more? In this article we’ll cover the basics of inflation: what inflation is, why it’s important, how it affects the economy and financial markets, why you should care about it, and finally, how it is measured and determined year-to-year.
What Is inflation?
Inflation is a general rise in the average price level of goods and services over a period of time. When inflation occurs, your purchasing power, the amount of goods and services that you can purchase with a unit of currency, is reduced.
Inflation is the opposite of deflation. Deflation is when price levels fall instead of rise over time.
It’s important to understand what inflation is and what inflation isn’t.
Avocadoes are popular with millennials these days. But just because more millennials are eating avocado toast and the prices of avocadoes go up, it doesn’t mean it’s because of inflation. Avocadoes are more popular due to shifting consumer tastes. Inflation is when all goods and services get more expensive, not just one or two items.
Why Inflation Is Important and Inflation Causes
Inflation is important because it has a huge effect on the overall economy. It’s the goal of most governments to keep inflation in line.
But, what causes inflation? Inflation happens when the demand for goods and services exceeds the supply. When this happens over time, prices go up.
If the inflation rate is too low it means that consumer demand is dropping. This may signify that there could be a larger problem with the economy. Low inflation encourages consumers to put off purchasing goods and services, doing further harm to the economy. However, low inflation does help lower the cost of borrowing for consumers, as low inflation means the Federal Reserve is less likely to hike interest rates.
On the other end of the spectrum, if inflation is moving up too quickly, it can negatively impact the purchasing power of consumers and also hurt the economy. This is why a country’s central bank will usually aim to keep inflation around a modest 2%.
How Inflation Affects the Economy and Financial Markets
Inflation can affect the economy and financial markets, too.
If inflation is rising too quickly, it’s possible that it could cause a recession. If the economy is growing too quickly it can cause a government’s central bank to raise interest rates by too much, which can cause growth to slow and subsequently cause a recession.
Low inflation generally signifies a healthy economy. When inflation is low, American consumers are encouraged to buy more goods and services. Waiting to purchase something would mean that you’d have to pay more for the same item later on. Low inflation also means it’s more attractive to borrow money, since low inflation and low interest rates usually go hand in hand.
In terms of financial markets, investing in stocks is usually a good way to combat high inflation. That’s because a company’s earnings should theoretically go up at the same pace as inflation. The reverse is also true. During periods of low inflation, investors tend to earn less from stocks, making it a less appealing time for investors.
Why You Should Care and Know About Inflation
You should care and known about inflation because it affects your daily life.
Let’s say you’re an investor. Taxes are an important consideration in investing, but so too is the inflation rate. If you’re only earning 1% interest on your savings account and the inflation rate is 2%, you’re actually losing money once you factor in inflation. (We haven’t even factored in taxes yet either.) That’s why it’s important to consider both taxes and inflation when investing, to determine your real rate of return.
Inflation also tends to have a big impact on those with fixed incomes. For example, people with disabilities and retirees can be negatively affected by inflation. If the prices of goods and services keep going up, while the income of these individuals stays the same, this could result in some difficult decisions for them to make. Individuals on fixed incomes may be forced to cut back on food and other discretionary spending to get by if inflation rises too quickly.
Inflation doesn’t just affect those on fixed incomes. You’ll notice inflation at work when the prices of goods go up at the supermarket, making it more expensive to feed your family.
How Inflation Is Measured and Determined
We already spoke about what inflation is: it’s the increase in price level of goods and services. Inflation is measured by measuring the rate of change in those prices.
The most common way to measure inflation is the Consumer Price Index (or CPI for short). The CPI measures the change in price of a basket of goods and services that the average family consumes.
Inflation is determined year-by-year by looking at the change in the inflation rate this year compared to last year.
The Basics of the Consumer Price Index (CPI)
The CPI is based on the shopping diaries of average Americans. Americans write down what they purchase and how much it costs. This information is then used to figure out how much prices are changing for certain goods and services.
The CPI gives you a better glimpse of how much prices are going up versus just visiting one grocery store. The CPI isn’t just for items you can purchase at the grocery store; it includes other expenses like utility bills, home insurance and gas.
So, how is CPI calculated? The CPI can be calculated in different ways. It can be calculated overall for the U.S. and it can also be calculated city-by-city to give an idea how expensive it is to live in one city relative to another.
When CPI figures are released, they have the overall rate prices have changed and then a core CPI rate. The core CPI rate strips out food and energy because those tend to fluctuate a lot more over time.
When you read about inflation figures in the news, they’re usually talking about the core CPI figures. Nevertheless, the core CPI figure can be deceiving since it includes housing costs, which can vary a lot depending on where you live in the U.S.