We receive many questions from our users about how to use credit cards to increase their float for up to 45 days. In fact, many businesses can use credit cards to buy something today, make money off it for 30-45 days or more without having to pay anything in cash or take out a business loan.

Our users pay business bills with funds from their bank accounts or cards, and their vendors receive the funds via a check in the mail or direct deposit. We’ve always seen many of our customers take advantage of credit card payments to earn card rewards and cash back, and now an increasing number of businesses are starting to use credit cards to also take advantage of “free float” to dramatically improve their cash flow.

Why should your business take advantage of “free float?”

If your small business is like most, it probably has around 30 days of cash on hand. Put another way: If your cash flow was suddenly cut off or if your business is hit with a large or unexpected expense, your business could stop running in 30 days. If you’d taken advantage of “free float” by using your credit card for your business expenses, your business could keep going for an additional 45 days or even longer. If your business expenses spike during a busy season, if your cash flow is poor during a particular time period, or if you’re making purchases for a big project, you can give yourself a lot of additional time to generate cash to pay for the related or other purchases.

How to get “free float” using credit cards

Know how to use your credit card to make money with it. Simply take advantage of credit card billing cycles. Every credit card company gives their customers about 30 days (in some cases 60 days) to use their card before it starts billing for purchases. The credit card company also gives their customers about 20 days to pay for the purchases. That’s about 50 days of “free float” for business purchases just after the cycle ends.

What if vendors don’t accept card payments?

Not all vendors accept credit card payments. With Melio, businesses can pay vendors and other bills like rent with a credit card because Melio will process the card payment and then send a check on your behalf. Additionally, business owners use Melio to schedule credit card payments in advance so the business will never miss a payment or pay late. With help from Melio,  businesses can more easily take advantage of “free float.”

Final Thoughts

Traditionally the threat of running out of cash was the number one concern of many small business owners because even though the business may be highly profitable, if the cash isn’t there to fuel the business, it simply can’t run. Increasingly progressive small business owners are using “free float” to increase their business’s cash flow. Now you won’t miss out on valuable rewards or better cash flow. The 2.5% fee is generally tax deductible for business. With all of these advantages for small business owners to pay with credit cards, small business payments are trending away from paper checks at record pace.