Credit cards in business

Credit cards in small craft businesses can be problematic without good credit.

Trying to answer the question regarding the struggles of starting out and being in business raised some issues surrounding developing a credit record and using credit and credit cards. Some say credit is useful for the unforeseen and that you need a good credit report to borrow. My view was different to others because having lived as a lifestyle woodworker I made different decisions based on a completely different paradigm than say those in regular employment with a fixed minimum income they can rely on. I think these things are what make me think differently. Borrowed money from relatives and friends is not a good thing and can lead to conflict even though it is the borrowers full intention to pay everything owed back. Borrowing from banks can quickly turn sour if you borrow to invest speculatively on the basis of developing stock. Of course many successful businesses have started that way, but then many times those finding success collapse every year.

People borrow to buy machines and equipment to make their goods. They borrow to buy materials and then they borrow to travel to shows and more. There is no end to justifiable reasons for doing all of these things. The arguments too are all quite justifiable. The issue I raise is that theorists have one view and realists another. Realists usually speak from their personal experience, theorists from possibilities and probabilities as yet unproved.

I recall times in my past when I put great effort into going to shows. I put my final hard earned cash into making product for three months for a single show. I had enough cash for the petrol but none for the hotel that night of the weekend. The heavens opened and the rains came down for three days. No one came. Had I borrowed money I would have been in debt with no way of paying back. I learned from this. Had I had a credit card I might have used the card, I don’t know. That’s not really a question of being self controlled. I was young with a young family. On the way home I stopped in at a state park and sold almost all I had at a good price. They gave me a check. This is very different than picking up a pay cheque. This is just a small example of early starting out.

The reason I am raising the question of credit and credit cards is that we are living in a society that is moving increasingly toward a paperless moneyed society. Whether you have a credit card or not, you must have good credit to be able to manoeuvre financially and to be able to take payments for your goods. Most people do indeed expect to buy your goods using a credit or debit card and less and less cash or cheque. So, that said, I wondered how some of you get around these issues in an ever changing world with online banking.


  1. “Rather go to bed without dinner than to rise in debt.” – Benjamin Franklin Wise man on personal finances.

    I work in an office for a living, so I don’t know what it’s like to not have a steady income, but I would imagine if I were a sole proprietor, getting a credit card would be making a deal with the devil. Because, once, in debt, I can only imagine it would crush the dreams of one aspiring to be a artisan, because of the compromises needed to ensure the debt is repaid.

    That said, it is a necessary evil, and because so many people rely on credit and debit cards to pay for things. I would most definitely have a cash discount of at least the transaction fees by not using a credit account.

    1. All too often many people do fail to comprehend what being self employed as an artisan is like. It is nothing like being self employed as a shop owner or an auto mechanic. I self employed computer engineer or some other service business, all of which are important. As an artisan you usually buy some raw or more raw material and then create something from it by adding value to it by changing its form. A potter buys clay and then shapes the clay, glazes it and fires it. This person creates something that doesn’t exist with their hands and then sells it at retail or at wholesale. They don’t generally buy something fully made to sell it on like say a hardware store does. The guarantees are far less and the risk far higher. Most banks are totally self protecting as are insurance companies and many more entities that make money based on the risks others take. Being an artisan is not for wimps. I raised my family always based on my skilled hands alone as a single income family. I can’t think of anything I would have changed even though the risks were always higher than others seemed willing to take. Cut your coat according to what cloth you have and you find yourself sleeping well at night. This saying is said to ​emphasize that someone should do as well as ​possible with the ​limited ​money and resources they have. That said, part of being a lifestyle woodworker is a life spent twisting with the curves and enjoying the versatility the life flexes with to make the resource we personally have which is usually different to someone next to us.

  2. In terms of receiving money, PayPal now has a system that allows small businesses to accept card payments. My wife was looking into it for a charity business and when I read the terms my usual scepticism proved unfounded, as it seems quite good. Terms, of course, may change as they get traction and will likely start taking a bigger cut.

    1. Paypal is fantastic up until a point, I took online orders through paypal but would need to pay about 5% in fees to transfer that to my bank account. In the end I decided not to accept any more paypal payments until I had used the balance in the paypal account to buy inventory online directly and avoid losing the 5%.

  3. I never purchase my timber nor movements on credit, yes I use my credit card but I immediately pay it off, I do not even wait for the morning to come without paying it off. I know fully well how business can turn to sour in a heartbeat so I make a habit of never getting into debt for business.

  4. I worked very hard at becoming debt free, and I believe in the 100% CASH down program. Credit card bills do not follow me home, and I therefore sleep better at night. I do not believe in paying interest to lenders (banks) for their marketed “services” that I either don’t need or that add little to no value whatsoever to anything I can do on my own by living responsibly within my means and staying out of debt. Additionally, when you pay via cash, there is no worry of identity theft or credit card information being compromised by hackers stealing personal information from companies (list too long to name) that all too often are incapable of keeping that data secure. When you pay with cash, merchants don’t even care what your name is, and you then also have no need to reveal either your phone number or email address for their all-too-frequent marketing campaigns (read: the new spam). It’s perfect. If you cannot pay with cash, such as on the Internet, then PayPal is the ideal method to make purchases without revealing any of your personal or financial information.

    “The rich rule over the poor, and the borrower becomes the lender’s slave.” (Prov. 22:7)

  5. i remember when i started my apprenticeship 26 years ago now .i was paid in cash in a small brown envelope .gross,net,and taxes writing on the front .today i am paid directly into my bank account which forced me to get a debit card for convenience. i also have a paypal account and find myself using less cash to pay for goods in today’s world .i am self employed now and would never had or would have a credit card .my father would always say if you want it today and cant afford it save up . i do however have some suppliers that will allow 30 days credit on materials which it just standard business practice .and these suppliers are just as important as my clients .

  6. A credit card is a tool. Any tool which is not used properly can hurt you. Use a credit card wisely and pay it off at the end of every month so you don’t incur finance charges. I use PayPal (which is linked to a credit card) for EBay, How can you buy on EBay using cash? Many sellers only accept PayPal. To not use credit means you will be going to a big box store to buy inferior tools rather than better made older ones.

    Proper use of credit can smooth out cash flow. For example, your utility bills are due and you don’t have the cash to pay them, but a customer will be paying you next week and you can cover the bills. Without credit, you will incur late fees on your bills. That is not good fiscal policy. Even if you incur a fee from the credit card, do the math and see if it is less than the late fees on the bills. Simple really. It always comes down to common sense and math.

    1. Debit cards works equally well with paypal.
      I prefer to have enough savings so that a late paying customer wont bring me down, but we all do things different, if your way suits you who am I to question it.

  7. It is also worth mentioning that you should get a deposit from a customer when they place an order for a custom made piece. The amount of the deposit should cover your raw material costs, that way if the customer goes south, all you will have invested is your time and you can hopefully eventually sell the piece.

    1. Good point. I have always taken a 50% deposit before work begins. The remainder on completion or on delivery when I know them. Known customers have always paid ahead this way. Eventually you get a customer base that keeps coming back. If in doubt all monies paid up front.

      1. I got an order for 3 clocks equalling $900 worth, he wanted it before the end of the year but no deposit so no start, I haven’t heard from him since. It’s the same when people get all snotty about not giving the cab driver money upfront when requested, there’s a reason why he asked. Some people are just untrustworthy which ruins it for those that are not, unfortunately builders suffer the worst.

  8. I’d like to chime in on this because I think most viewpoints and beliefs of financial success very much are influenced from others. I don’t think I’ve personally met one who couldn’t disagree more with me on the basis of this. Most common Americans see debt and the ability to borrow money as a priority in growing their financial status and using that to obtain their necessities to live. They appear further along in this by having rent to own house with little to no repairs needed and a rent to own vehicle that most likely won’t need repaired that all include unnecessary “luxuries” and I do believe these people are the ones with most influential power in this matter because material things are attractive and a great lure for those without. However those same people are the ones over their ears in debt and have excellent attendance to the job they hate which they can’t leave because of the 1500 dollar shadow waiting for them at the end of the month and often they don’t realize theirselves until after the dust has settled. By doing this you rob yourself of the trials and tests and personal development, the experiences need to overcome situations and be personally successful inside, rather than visually successful on the outside. I don’t want to say it’s all bad but I do believe it’s near the opposite for an artisan leading a separate kind of lifestyle in craft. By the way there is Chinese food in the mall best in town. When I was a boy there were 6 7 places to eat in that food court and now it’s just them. Nobody else survived. so now when you go to this mall you eat Chinese food there is not other meal options and you don’t eat if you left your cash in the bank. They accept cash only and no one else can compete with them

  9. Family busineses can indeed sour. I became involved in a partnership with mom dad and brother in retail paint. When i left to go back to the ‘old’ job i had asked for them to give my draw towards the credit card in my name, then continue to beat down the debt. should have been paid off in less than a year. They did not apply as intended, the business failed, divorce, backruptcy… It all well behind us now, but those dangers are very real. I would strongly agree with putting borrowing / money barriers in place especially with family. I would choose in the furture to grow organically, invest slowly, and not be to eager to bite off more than you can chew.

  10. Paul, I could not agree more. Debt is bad and living with it is a choice, not a requirement. I understand that in this day and time it is hard to live debt free, but it is possible. Having no debt is very freeing as you have described in you posts. It allows you to make choices and decisions based on what you would like to do instead of “I must do this or that so I can pay off this loan or this credit card.”

  11. A good credit rating is vital in the States to buy a house, or even a used car. There are other ways to establish good credit than rely on credit cards with all the dangers of debt that go with it for the self-employed. It is common where I grew up in Pennsylvania to co-sign a small loan, say $2000, when your child turns 18, put the money in a new checking account, and pay off the loan immediately. Instant good credit to start off. Good credit can be maintained this way indefinitely. Small business owners can get a line of credit at the bank for any emergencies and draw on it like a check, if need be, too.

    The best use of credit is to only charge what you already can afford to pay off in cash.

  12. In the US, thanks to local and state property taxes on the governments declared value of your home, you are never debt free.

  13. We have no debt, other than what we incurred on the credit cards each month. Each month we pay the cards off in full. It’s a substitute for case, pure and simply. If we know a purchase cannot be paid at the end of the the month, the purchase isn’t made. With some people I guess it takes great discipline. With others, like us, it’s a simple mind set.

    As a veteran who was told by a credit card application clerk that the US Army was not true employment and therefore I was not eligible for my first credit card, it’s a mind set burned into my financial outlook. I fortunately did not have a flamethrower in the man’s office at the moment.

    The only exception was in the day when we did not have $2,000 cash each to deposit in our US Individual Retirement Accounts. We borrowed the deposit amount from credit cards, paid it off in three months, (DEBT!), and never touched it again. It’s still there in the Individual Retirement Account. Call it an investment in ourselves.

  14. Yea It’s almost impossible to get away from at least a debit card. I’ve never paid intrest on normal household goods such as food, utilities and such.
    Car payment yes. But hear’s my take on that. I never use my hard earned cash on a large ticket items that do nothing but depreciate such as automobiles. I use my cash to make intrest, ( Money)…There’s less risk by doing it this way and you also decrease the intrest you pay for the borrowed money… Automobiles are about the worst investment one can make, but it’s a necessity ..Homes however are different hopefully yours will appreciate over time. Hopefully..
    I’m disabled so I can’t travel like everyone else so I have to purchase older tools through dealers and EBay . so what I did was I set up a second checking account at my bank and used that account only for my PayPal account , so when I want to purchase a tool I transfer money into that account and make my purchase right away. This way if someone is capable of hacking that particular card then they can’t deplete my personnel checking account.
    Anybody can change their lifestyle an adapt to not using credit cards to live on , its easy, less stressful and it makes for a happier home. My Father use to tell me growing up . He would say Son if your going to be dumb you better be tough.
    Cheers everyone

  15. We are trained (brain washed?) to think that life cannot be lived without debt to the banks and it is some sort of tool that benefits us, but that is a lie that profits the banks instead. You need to have 6 months of living expenses saved up in cash in a savings account as an emergency fund, this will keep you from using debt in an emergency. Debit cards can be used for nearly any electronic payment and you really can still write a check to buy a car and even a house. If you buy or sell your next car on Craigslist you”ll be pleasantly surprised to learn that cash is still king.

    The people of the U.S. on average are utterly ignorant and lazy about finances and don’t know how to delay gratification and live a simple lifestyle till they can afford to buy what they want in cash. Many are also so bad at math that they think a tax deduction on a mortgage is more profitable than a paid off home. If you spend more a month on your cable TV or cell phone bill than you are setting aside for your children’s higher education then you’ve got a problem in my book.

  16. About 500 years ago an English chap called Bill wrote;

    Neither a borrower nor a lender be;
    For loan oft loses both itself and friend,
    And borrowing dulls the edge of husbandry.
    This above all: to thine own self be true,
    And it must follow, as the night the day,
    Thou canst not then be false to any man.

    Very wise man that.

  17. Credit cards ruined me financially but I did take all the cash I could scrap up, mostly retirement money and buy a used sawmill to supply wood for my woodworking. I needed a tooth setter for the blades on my mill and could not afford the nearly $2,000 to buy one so I did some research on the Internet and made one. The same goes for shop tools. By used at second hand stores and Craigslist etc, or make them. I made the poor man’s router, works great!

    My point is this. I thought I needed all sorts of things that I bought on credit and all I really needed was to use my brain and a little ingenuity in order to make due with what I had.

  18. The most dangerous and harmful debt is that owed the government in the form of many, many taxes. It is never paid off because the government never has enough of your money.
    Steve, I agree with most of what you say, with the exception of debit cards and education. Back in the days when your money actually earned interest, I only used credit cards because I could use the card company’s money for almost a month while my savings earned interest before I paid off the card.
    My other minor difference of opinion is saving for your children’s higher education. Unless they are majoring in a hard science, chemistry, physics, medicine, etc. it’s better to not waste the money. If they want to be a craftsman, they can use those savings as a great head start.

    1. In this context I meant “higher education” as including university and non-university alike and more properly should have said post-secondary school education or training. It was only meant as an example where people are spending beyond their income with no planning for the future.

      1. Got it. Sorry if I sounded high and mighty. I’m just disgusted with what universities have become.

  19. Most people have no understanding about what money is. Paper currency is only promissory notes. They have no value except for the promises of our governments to extend to them validity as a medium of exchange.

    All western governments are in debt because their monetary systems are Ponzi schemes. That is: Money is created out of thin air by the banks and when you borrow this money you are charged interest on it. Take out a business loan or mortgage and that money is never printed it’s only put on the books out of thin air.

    A super con game. Governments borrow from bankers too and we all know the kind of debts they have incurred. This kind of money is called ‘Fiat’ or ‘debt based’. Example: That means when a note is printed, a pay back debt is attached to it immediately. This makes the whole society permanently in debt to the creators of the notes.

    Take some time to look up this information on the internet and it will change your view as to what money really is and who controls and who really benefits from this system. Most all of the money in the world right now is invisible. It has been computer generated. If everyone who has money in their bank account goes to take it out tomorrow the banks don’t have the paper cash to return to you.

    One other fact: When you put your money in any bank the bank then legally ‘owns’ your money. You gave them this right in the small print of your banking agreement with them for the privilege of doing business with them. You have to request re-control of your assets by withdrawal of your funds but in any ‘so called’ crisis the banks can hold on to your money and prevent you access to what is your’s. In Greece recently the government took money from private savings accounts to satisfy debt owed to lenders. This law exists in your country too.

    There are other deeper issues involved,…do some homework and educate yourselves.

    1. This getting off topic but, money is not a Ponzi scheme.You have clearly read a lot about this on the internet; have a look at what actual economists write rather than the conspiracy theory sites you have been reading.

      The reason for getting rid of the gold standard is because it was putting the brakes on the economy. Governments can predict the need for money and increase the money supply for when it will be needed rather than increasing it when there is a shortage. The economy grows faster as a result.

      I agree with you that keeping money in the bank in Greece is a bad idea right now. In most of the developed world, that is not the case.

  20. I own a small business…unrelated to woodworking. I’ve use credit (both bank cards and bank line of credit) as a matter of practice for the last 3 years. When I purchased the business it had 6 figure debt. Today the debt is gone. Credit is a good thing. Lack of discipline is a bad thing. Don’t blame the banks and credit card companies for poor personal decisions.

      1. It is a Relax The Back franchise business. We are a specialty retailer of ergonomic/posture corrective recliners, office chairs and sit/stand desks, sleep systems, full body massage chairs, travel support products, etc, all designed to relieve and prevent back and neck pain.

        1. Then that somewhat invalidates your advice really. I think to be fair. As does any advice here suggesting credit debt is fine too. But this has been very interesting and with so many inputs i think we have seen a lot of good advice coming in. There are two camps so far. Those who work with their hands to earn their living and those who have income from other sources but not from working as an artisan at some level. I am not saying that is the only qualifier, just adds a little weight to the advice. You don’t seem to be earning your living as a crafting artisan and I assume never have. Your business is a service business or so it seems. I say this kindly. Just not apples for apples you see.
          Now that’s not to say you don’t have valid opinions though.

          1. My intent was only to suggest that financial discipline is critical for any business regardless of the nature of the business. In reality, as a small business owner, I do not draw a salary. My income is based solely on the revenue generated by my business, less all expenses. As a result, my draw fluctuates every month….occassionally, it’s very little. It’s not just the money, I do it because I like the business. Similar, I would think, to any one who is self employed, including craftsmen and women.

          2. I appreciate that, Phil, and I will end here. Having worked in the realms of the self employed and as an artisan the predictabilities are radically different. I think that it seems the majority admonish everyone to establish good credit but to remain debt free. I am not at all risk averse but just to give you two examples that steered me toward that end this might help. At one time I too used my good credit with my suppliers to regularly buy my supplies from them. They gave me 30 days credit and I always paid as a soon as the account came. One year in 1985 I fell ill and was taken into hospital with a terminal disease that rendered me, an otherwise very fit and active man, incapable of being able to work. I paid all of my debts with another source plus savings, thinking I would soon be well and get back to work. That didn’t happen for six months. On a second occasion a large US outdoor retailers bought $10,000 worth of product from me and a few weeks later declared bankruptcy. They had been a good customer for years. They used and sold my goods and I had to eat much of the debt. Thankfully another company bought the debt and we made it through. These are the things you most likely don’t have to face but a lone worker working for him or herself has nothing and no one to replace them. This is where I rest my case. Never presume that things will always be in your favour. Especially when it comes to borrowing.

          3. Thank you Paul for your clarification. A sole artisan/crafts person certainly is exposed to business risks and challenges I do not face. Point well taken.
            Appreciate the perspective you provide in many life situations.

  21. I pay with credit cards and pay the full balance each month. The card I use regularly pays me back a percentage of what I spend (1-3% depending on the purchase). Since I never carry a balance, I never pay interest to them so I come out ahead compared to paying cash.

    My advice to younger people is:

    1.Never borrow money for anything except to buy a house (and the old rule (in the U.S.) of buying the most expensive house for which you can afford the payment no longer applies – buy the cheapest house in which you can comfortably live.)

    2. For other purchases, if you don’t have the money for something, don’t buy it until you have the purchase price (and some money saved up for other things you will need in an emergency.)

    3. If you are in debt now, pay the minimum on everything you owe except the smallest balance. For the smallest one, pay it down as quickly as you can afford to. When it is paid off, you have a new smallest one – repeat until you are out of debt. Never go back into debt (except for item one, above).

    4. If you do all of the above, the amount of money you will have in the bank that you would have spent on interest on your borrowed funds, will be available for you to invest in your future. Staying out of debt is like getting a discount on everything you buy.

  22. Paul, while you provide free apprenticeships, I suspect that is relatively rare these days. Most woodworking schools appear to charge £15-20,000 per year, plus of course living expenses. How would you advise an aspiring craftsman to fund themselves through this these days?

  23. I go to one of the largest churches in TX and it leans on the verse in roman’s that says owe no one anything. The church is debt free. Also I was watching shark tank and Mark cuban, billionaire owner of the mavericks, told a contestant since he had a bank loan he would not invest his money to help that business. He told that contestant he was crazy to get a loan to start a business and that he used saved money to start his. I have enjoyed reading these past by blogs. Based on what I have heard it is spot on. Now if I can find excess to get something going

  24. As a management accountant for a large UK company I deal with business debt on a daily basis. Debt is a double edged sword, it has the ability to drive your business forward and equally the ability to make it sink like a stone.

    From my experience I would only ever use debit to finance something you are confident you can make a return on that exceeds the cost of the finance. I would also take a close look at your cash position and make sure you can afford to repay the debt. If you can’t manage either of these then stay clear of debt.

    Credit cards are also the worst kind of debt available to businesses and individuals. I would exhaust all other avenues of finance first as this type of debt is too expensive and compounds in a way a term loan from a bank would not. I appreciate that when you are starting a new business raising finance can be a struggle, however if you make bad decisions in an attempt to grow your business faster that it’s naturally rate it will probably end badly.

    I agree with Michael, taking out a loan to start a business is crazy, your just swapping working for an employer for working for the bank. They don’t care if you eat when their payment comes due, nor do they care if you have had an work this month.

    Trade credit from suppliers is not hard to get, you will probably have to be a cash customer for a couple of month but there after most suppliers will extend you some credit terms. So long as you pay on time and don’t mess them about they will happily work with you to extend your terms and limits as your business grows.

  25. The future of small craft enterprise isn’t in banks or credit cards. It might be in a reliable local credit union, donor or sponsor though most of it will come in micro-transactions and crowd-funding. At the end of the day craft woodworking is and isn’t a business of production, yes we all make things and sell them hopefully for profit but it’s all bespoke art the value is as much in it’s function as an item and the way it’s been made. Banks don’t understand that value properly at their most basic level, a bank sees a business in it’s inventory, the tools, the stock and the real estate.

    Then there’s heritage woodworking which is more orientated towards living history and education rather than manufacture. The old boathouse can’t exist as a business any-more but it can survive as part of our cultural legacy as a non-profit with support form arts councils, local and national funds.

    In the time I’ve been training I’ve seen a pretty big growth in craft woodworkers, furniture makers and expert joiners in my local area and I can’t compete (it might open up possibilities for training and employment when I finish my current college course) so I’m looking at other ideas. As a member of the local historical society I’ve been looking at alternatives to establishing a for profit business and there are avenues to be taken.

  26. I worked for 40 years as part of the great unwashed self employed and learnt that if I did not spend I did not need to work

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