Business Credit Cards: Are They Right For You?

Filed Under Business |

by Lorna Shea

Business credit card accounts are generally offered to the owners of small or mid-range businesses. Large companies and corporations tend to be offered special packages by financial institutions, designed to cope with the specifics of their organisation’s needs; the bigger a company gets, the more complicated their financial structure tends to become. But for small and mid-range businesses, there are a large range of business credit card accounts making different offers and vying for custom. But where do you start?

Initially, you will need to work out how the credit card will be used and to do this, you’ll need to work out the amount of credit that your company will actually need. It is a good idea to work this out in accordance with your monthly outgoings, as your company will be paying the credit bill on a monthly basis. Once you have calculated how much credit your company can afford to borrow, you should then try and assess how many cards your company will need and which of your employees will be authorised to carry and use them. This may mean that you will need to employ a system that keeps track of your employees’ expenses. There are some credit card companies that offer a facility which reports the use of a credit card and allows the relevant data to be downloaded to accounting packages, such as Sage.

The next thing to consider is what ‘credit’ means, in business terms. Put simply, it is the opportunity to borrow a fixed sum of money that is then repaid over an agreed period of time with a sum of interest for the service. If your business is already up and running, you should have a good idea of its income and expenditure and then be able to make a reasonable calculation as to how much credit the company actually needs. If your business has been trading for less than 2 years, you may want to seek financial advice to discover how much you reasonably need and, given that you are a relatively new customer, how much you can reasonably expect to apply for.

The other benefit of these cards, credit aside, is the loyalty reward scheme or perk system that many operate. Again, it is worth researching the deals available to find the rewards that will maximise your company’s savings; if your company employs people who need to stay in hotels a lot, then look for a deal on hotels. If your employees travel a lot, then you might want to consider deals on car rental or road-mile rewards. There are many options out there.

You can research the deals, interest rates and other facilities of most cards, by using an online comparison site. These display the relevant information of most cards in an easy-to-read table system, so that you can quickly compare the benefits and pitfalls of each card.

You may need to issue other employees with their own business credit cards. It is essential that those employees can be trusted to use them wisely and not just as a convenient substitute for cash transactions, which can incur high rates of interest. It can be a wise move to impose an initial limit on their business spending, just to see how things go. There are business credit cards available that offer a ‘reporting’ facility that can tell you how much each employee spends and the relevant data can also be downloaded onto accounting packages, like Quickbooks or Sage. This may seem a little strident but, as the person who applied for the business’ credit, you don’t want to be liable for other people’s thoughtless overspending.

About the Author:

Lorna Shea looks at the pros and cons between Business and Personal Credit Cards. Read this informative article helping you to research the best Business Credit Card option for you