Credit Card Basics for Law Firms

Cash may be king, but your law firm still needs a credit card.

The truth is, your law firm needs a credit card. Your debit card just isn’t good enough. Not only can a credit card boost your credit score, which is crucial when your business requires a loan down the road, but there are countless benefits available to you when the balance is paid in full each month. Here are just a few:

1. Dispute transactions –  Vendors who don’t deliver or haven’t earned their pay don’t need to be your responsibility. Although it might be tempting to manage your cash flow and expenses using your business checkbook, only a credit card offers protection from transactions that aren’t totally above board.
2. Lighten your load – As an attorney, you don’t need one more thing to do. By allowing your finance department to take care of bill payments, you can still maintain tight accountability with employee spending limits and expenses without handing over the checkbook. 
3. Transparency – Concerned about an expense? Want to know whether a vendor was paid on time? Log in to online banking and see exactly who is spending what and with which vendors in real-time.
4. Act quickly – When you see a spending problem, react in real-time by turning off an employee card or disputing a transaction. 
5. Manage Cashflow – Cash flow can make or break a law firm. A credit card gives you 30 days of breathing room to manage unexpected cash flow events, before they turn into cash flow problems.

Although a business credit card can make cash flow smooth and easy, it’s vital that spending is managed in the same way you would a debit card. To ensure maximum benefit, be sure to always do the following:

1. Pay in full monthly – Your business credit card should be used for revolving credit, not as a long-term loan. All law firms should have a LOC (line of credit) available to be used to carry longer-term balances when necessary. Payment terms and interest rates are far more favorable on LOCs than credit cards. Don’t get sucked into easy money. It doesn’t pay.
2. Set up auto-pay – Don’t trust yourself or even your finance department to pay your credit card bill on time. There’s just no reason to risk carrying a balance. Auto-pay is one of the few things our computer overlords have perfected. Take advantage of it. Every credit card offers the ability to set up auto-payments that absolutely guarantee you will never incur a late fee. You can set them up to pay the minimum balance or the balance in full. Paying the full balance every single month is always better, but some firms have cashflow that’s variable enough that the autopay for the minimum balance is a safer bet.

Now that you know the basics of establish credit for your law firm, you’re ready to make sure your business credit card is truly a profit center and not an expense. But don’t be fooled, not just any card will do. Selecting a company that offers the terms, conditions, and benefits that fit your business is strategic. Thankfully, we have loads to share on that topic as well. Sign up for our email list to make sure you don’t miss our insider tips on how to choose the right credit card for your firm.

Got questions about credit for your law firm? We’re here to help. Schedule your 15-minute consultation today.