Business Credit Cards

If you are a business, large or small, you’ve probably already been pestered by your bank to get a business credit card. Before you decide which card is best for your business though, make sure you understand what different business cards exist and which features you need.

How is a business credit card different from a personal credit card?

Business credit cards work the same way as personal credit cards in that they can be used to purchase goods and/or services in a variety of ways, including by phone or internet. However, business credit cards differ in the following ways:

• they are issued in the name of the company and not the individual, and all debts are the responsibility of the company and not the individual;
• they may have spending controls in place. For example, there may be limitations on what can be purchased on them and they may have restrictions on withdrawals from ATM machines;
• management reports are provided with the card. These include itemised listings of purchases that allow companies to track expenditure over time; and
• they may come with complimentary features such as insurance and banking discounts.

Why should I use them?

The benefits of using a business credit card include:

• security issues associated with carrying large amounts of cash to make purchases;
• usually cheaper than using cheques;
• spending controls;
• separation of business and personal expenses, thereby reducing the time taken to reconcile accounts;
• allows you to take advantage of internet shopping which is often cheaper than using a store front; and
• is fairer on your employees who don’t have to use personal resources to make business purchases.

What are the different types of business credit cards?

Each business credit card is different depending on the provider, ,however there are two distinct categories of credit card: charge and credit.

Charge Card

Charge cards require you to pay the full amount when the bill is due, or else pay heavy fees and charges.
Charge cards are most appropriate for larger corporations where cash flow is sufficiently high that all balances will always be cleared by the end of the month. Diners club and American Express are the most popular charge card providers.

Credit Card

Credit cards allow you to make a minimum payment on a bill, but charge you interest on any amount left outstanding.
If you are in a small to medium enterprise, where cash flow is unpredictable, this could be a better option than a charge card. However, it’s always best to pay your entire balance off each month if possible to avoid interest charges.

Where do I get a business credit card?

Many different institutions provide business credit cards, from banks to building societies and credit unions. It’s definitely worth shopping around for the card with the interest rate and features that you need, and weigh up the savings you might accrue against the convenience of attaching a credit card to your current bank account.