Credit Cards for Business

It is common for most people to have one or more credit cards, which they use for personal purchases. But if you are in business or starting one, you may find it extremely useful to have business credit cards help you operate your business.

Business credit cards offer the users — whether they are corporate executives or small business owners — many advantages.

  • Small business owners just starting out can use business credit cards to help them cover a short-term lack in working capital. It is often difficult to obtain bank loans for small business, particularly those in the start-up stages without a solid business history to show. When pressed for cash to get over a temporary deficit, they can use business credit cards to pay for the business-related purchases or (as a last resort) to get a cash advance.
  • It becomes easy for the business owner or executive to separate charges: business expenses go onto their business credit cards; personal expenses are put on their personal credit cards. You minimise the confusion when you (or your accountant) are reconciling accounts and eliminate potential problems associated with mixing up accounts.
  • Since you’re able to use business credit cards to absorb your business-related expenses, you avoid piling debt onto your personal credit cards, thus preserving your personal credit history. All charges on the business credit cards are considered company liability. The same thing holds true for your employees. They avoid the need to use personal resources to pay for business-related purchases.
  • The business credit cards are issued in the name of the company (although the issuers do make provisions to have the business credit cards personalised). This means all spending on business credit cards are tax-deductible as a legitimate business expense.
  • Issuers of business credit cards provide online services, which enable you to keep track of all transactions, real-time and anytime you want. All transaction data going back to the previous year is available.
  • More importantly, their online reports are designed to interface with common accounting software you may have in the office. If you wish, you can download all the data into your computer and give a copy to your accountant.
  • It is also easy to set up individual profiles of all personnel with your business credit cards. This includes individual spending limits, types of purchases authorised, or restrictions on ATM withdrawals.
  • Aside from the online services, the reporting system for business credit cards generates a monthly statement designed to fulfil the required details on Goods and Services Tax (GST) reports. This makes it easier for your business to prepare its Business Activity Statement (BAS). Some issuers have online software with financial analysis and cost-benefit analysis capability — allowing you to exercise better control on expenses and management of GST.
  • Business credit cards usually have higher credit limits than personal cards. If there are multiple business credit cards for the same company account, the total of individual spending limits should not exceed the over-all credit limit for the company.
  • The interest-free period ranges from 45 days (for lower-rate business credit cards) to 55 days. Interest rates vary from 11.99% p.a. to 15.99% p.a., usually after a brief 6-month period with 7.99% p.a. introductory interest.
  • Some business credit cards also provide liability insurance protection from fraudulent misuse. There may be a built-in transit accident insurance cover on business-related trips. There may be discounts on banking transactions and waiver of specific fees if your annual spending on the card reaches a certain level.

The two most useful features in business credit cards may be these — the online management information and business reporting system you get for free, and the unsecured credit line that provides emergency working capital. These could help you gain an edge in your business.