What Small Business Owners Need to Know About Credit Card Financing in 2025

Credit cards have long been a vital financial tool for small business owners. From managing day-to-day expenses to covering unexpected costs, they offer flexibility and convenience that help businesses stay afloat. However, as recent insights from Intuit’s QuickBooks Small Business Insights survey suggest, the evolving dynamics of credit card usage post-pandemic are reshaping the financial landscape for small businesses in the U.S.

The Increasing Role of Credit Cards in Small Business Financing

According to QuickBooks data, credit cards have become the most common way for small businesses to fund their operations since April 2023. The survey revealed that 55% of U.S. respondents charge more than 25% of their total monthly business expenses to credit cards. This growing reliance on credit cards underlines their importance in bridging cash flow gaps, financing growth opportunities, and managing operational costs.

But while credit cards provide access to immediate funds, they come with significant risks if not managed carefully.

Post-Pandemic Trends and Rising Balances

Following the COVID-19 pandemic, small businesses dramatically increased their credit card usage. While this helped many businesses survive challenging times, the rate of repayments couldn’t keep up. Over time, this led to higher outstanding balances, which swelled further due to rising inflation until early 2022.

When interest rates increased, borrowing costs on these growing balances surged as well. Businesses saw their average monthly interest payments increase by $50 within just ten months—that’s an additional $600 in annual interest expenses.

The Ripple Effect on Small Business Growth

Higher interest payments can significantly strain a small business’s cash flow. When small business owners allocate more budget to loan and interest payments, less cash flow is available for investing in new team members, technology, or marketing.

This shift in cash allocation can slow growth opportunities for small businesses. While credit card financing may support short-term needs like expanding operations or hiring staff, over-reliance on high-interest debt could carry major long-term risks.

The Risks of Undisciplined Credit Card Usage

The report highlights one key concern for business owners to consider: credit card debt often carries higher annual percentage rates (APRs) than other forms of financing. While it may seem like a solution in the moment, managing debt purely through credit cards can become increasingly expensive, especially in an environment of rising interest rates.

Undisciplined credit card usage can hinder financial stability, making it difficult for businesses to achieve long-term goals or weather future economic challenges.

How Small Business Owners Can Navigate Credit Card Financing

Business owners can minimize financial risks and maximize the benefits of credit card financing with strategic debt management and careful planning. Here are some actionable steps to consider:

1. Forecast Payments and Balances

Stay proactive with cash flow forecasting. Understanding your future expenses will help you analyze how much you can charge to your credit card without taking on excess risk. Aim to keep balances low to reduce interest payments over time.

2. Prioritize Timely Repayments

Consistency is key. Designate a portion of your monthly budget specifically for paying off outstanding credit card balances. The faster you repay your debt, the less you’ll spend on interest.

3. Explore Alternative Financing Options

Depending on your needs, business loans, lines of credit, or equipment financing may offer lower interest rates and better repayment terms than credit cards. Explore these options to diversify your financing sources.

4. Build a Debt Management Strategy

Work with us to develop a customized debt management plan. This ensures you stay compliant with loan agreements, avoid penalties, and use credit cards strategically without harming your financial health.

5. Reinvest Wisely

Instead of relying solely on credit cards to fund growth, tap into existing profits or other lower-cost financing options to invest in team growth, technology upgrades, and marketing strategies.

The Bottom Line

The insights from Intuit’s report highlight a critical takeaway for small business owners: while credit card financing can be a valuable tool for funding operations, over-reliance or mismanagement of credit card debt poses significant long-term risks to financial health.

The landscape of small business financing is evolving, and small business owners must adapt. By being disciplined with credit card usage, focusing on debt management, and leveraging alternative financing options, businesses can maintain stability while positioning themselves for sustainable growth.

If you’re feeling uncertain about managing your business’s credit card use or need guidance on creating a smart debt management strategy, our team of advisors is here to help. Contact us today to take control of your finances and unlock your business’s full potential.