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What is a business credit card?
Business credit cards, also known as corporate credit cards, are a good way of getting additional funds — when required. Use a company credit card to help control cash flow, keep track of expenses and spread the costs of a purchase.
Corporate credit cards come with numerous benefits and rewards. Thus are a good option for most enterprises — big or small.
Business credit cards — considerations
Small businesses often have challenges tracking and managing their expenses. Business credit cards, with detailed billing reports and online management, are a good solution to this problem. In addition, they allow you to separate business from personal expenditure.
Company credit cards are similar to personal credit cards, in that they provide easy access to revolving lines of credit — that can be used for several purposes. These lines of credit, will usually have a set limit — which is primarily dependent on your company’s turnover.
Business credit cards are an excellent way for you to build up your credit profile — allowing you to obtain bigger loans in the future. This is great for start-ups and small businesses, who frequently lack the credit history required — to borrow funds from banks.
Corporate credit cards typically come with extra benefits — like rewards, cashback, insurance products, shopping discounts, 0% interest on purchases and much more.
Credit card providers offer different deals to different businesses. These deals are dependent on company size, as well as financial strength. Further, credit cards are sometimes only provided to customers that have a business bank account — with the provider.
Multiple business credit cards may be issued — to be used by employees and directors of the business.
Making use of a company credit card, in the correct manner, can have a positive impact on your company’s finances. Responsible use is encouraged, as like with all credit, failure to make repayments — can result in extra charges and poor credit ratings.
How do business credit cards work?
There are many companies that issue credit cards. Each of these companies would have their own set of rewards and bonuses, so you would need to shop around — for the best bank or provider.
Once you’ve found a suitable credit card provider — you can make an application (usually online). In the application you would provide basic details of your business — which will help the card provider assess your eligibility.
The approval of your application depends on your business’s financial circumstances and its borrowing history. This information also determines what particular terms you may be offered — such as interest rates and credit limits.
Should your application be approved — you will be issued a corporate credit card, and will then be able to make use of it.
Companies normally do not have to pay interest on their card debts, if they repay any monies owed — by month end. Where this is not possible, businesses are required to make minimum monthly repayments — where interest is charged.
The interest rate depends on your card provider and the type of business transactions made. Accordingly, it is important that you actually go through any policy documents — before agreeing to the terms.
Other fees that may apply include annual usage, late payment , exceeding credit limit, inactivity, cash withdrawal and foreign transactions.
Benefits of business credit cards
- Easier accounting
- Itemized statements
- Multiple cards can be issued
- Interest free
- Rewards — travel insurance, air-miles, hotels, airport lounge access etc.
- A form of unsecured lending
- A financial cushion
Limitations of business credit cards
- Short-term finance — Interest rates can be high
- Interest rates are not fixed — they can go up
- May require a personal guarantee
- Less purchase or fraud protection — than personal credit cards
- Risk of employee abuse
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