Business credit cards are a source of financial independence and security for small, medium and large companies. This type of card allows a business far greater control over their finances and purchasing on credit than a regular business cheque account.
Why apply for a business card?
Financially, a business credit card can save a business money and even earn them extra financial rewards. These cards often have a higher interest rate (APR) than personal cards. However, the payment period is adjustable meaning that large purchases can be made and paid off at a rate suiting the particular business.
Business credit cards can be issued to a number of cardholders, meaning that employees can carry cards and use these for any business related expenses. When all business transactions are made from employee cards linked to one account, managing finances is much easier.
The credit limits on business credit cards are generally much higher than on personal credit cards. Easy access to credit gives companies access to large amounts of cash quickly and without hassle. Access to a company's money is often difficult and a longwinded process. A business credit card eliminates this problem as credit is ready and available 24 hours a day, seven days a week.
The rewards accompanying business credit cards are targeted to benefit businesses and employees. Rewards earned from this type of credit cards can include benefits such as travel and flight rewards in the form of air miles.
Choosing the right card
Choosing the right card for your business needs to be a carefully prepared decision. A business should research the available options and ensure that they are informed about how each card works: its strengths, limitations and how to use it to the company's advantage.
Many websites will offer a credit card comparison tool that allows potential cardholders to compare the various cards they are interested in to find the exact solution tailored to their needs. With a comparison tool, a business can see the pros and cons of several cards and make their decision based upon which interest rates, credit limit, rewards programmes and payment period are most suitable to their needs.
The first thing to consider when choosing a card is to decide what the needs of the business are. A company should ask questions such as: does the business need a loan or capital as soon as possible to make a purchase and pay bills? Can the business pay off the balance of the card on a monthly basis or will they need to pay it over a longer period? How many employees will require a credit card linked to the account? What should the credit limit be? These are examples of questions which will help pin-point which business credit card is the best choice for a particular business.
Making it work for your business
When considering which business credit card to use, a business should highlight which benefits are most relevant to a company's interests. For example, a company which does not travel would be foolish to use a card with travel points or air miles as a reward.
Making a large purchase on a business credit card due to an urgent financial matter is very common. When considering a card for matters such as big spends, a business will need to verify whether they will have enough capital to be able to pay off the balance and avoid a lot of interest charges, or be willing to pay the amount off over a long period of time with added interest.
In the short term, making a large purchase is far easier on the monthly budget than paying the balance. In the long term however, paying credit off over an extended period will cost more, but is easier to manage if existing funds are not high enough to be able to pay off the balance at once. In addition, paying the balance will be more financially draining at first than long term payments, but will save a lot of money otherwise charged in interest.
Making purchases and paying the balance within the grace period or when the next bill arrives will benefit a company because it builds their credit rating. This enables the business to qualify for greater loans and make larger purchases when the company grows in success and size.
A business can make their credit card work for them. Awareness and knowledge as well as careful consideration will bring big financial and administrative benefits to a company when deciding upon a business credit card. A comparison as well as careful research and realistic goals will enable a business to enjoy the experience of using such a card.
About the Author:
Plastiq is a credit card comparison website, featuring a variety or credit cards in South Africa, including
business credit cards.
