What is Business Credit Cards and Why You Need One

by heatfeed

If you own a business, you have to pay for many expenses, including office rent, salaries, purchase of raw materials, business expansion, debts, and more. In addition to these expenses, there are expenses for travel, investments for business developments, and other miscellaneous bills. You cannot approach a lender to help you with a business loan to cover these bills, and this is where business credit cards come in handy. A business credit card can be understood as a source of funding to keep your business operational until you can repay the debt. If you’re a business owner and have come across offers to buy a business credit card, this article will help you understand what are business credit cards and how they can help you increase your company’s purchasing power.

What are Business Credit Cards

A business owner can apply for a business credit card from banks and financial institutions. Business credit cards are similar to normal credit cards except for the fact that they can only be used for business expenses and not for personal use. They provide businesses with a revolving line of credit that has a set limit. Having a business card is a very convenient way for businesses to make purchases, payments, and withdraw cash. The business owner can obtain business credit cards for their employees as well. Be it traveling within the country or somewhere overseas for business purposes, the business owner and employees can use their credit cards to make payments. The bills have to be paid by the business owner once a month to avoid any interest charges. To summarize, business credit cards are an excellent tool to fuel your cash requirements and manage your business expenses effectively.

Benefits of Business Credit Cards

With the help of business credit cards, all the business expenses can be tracked and managed easily. It acts as financial support without any additional charges, given that the amount is repaid in time. The best part is that getting business credit cards is easier than applying for small business loans. That’s not it, there are many other benefits of having business credit cards. Apart from getting bonuses on reaching a certain target amount and cashback offers on business expenditure, listed below are some of the most useful advantages of business credit cards.

  1. Cash in Advance

Every business needs cash from time to time to make payments. Business credit cards allow users to opt for cash whenever they need it urgently. However, you can only withdraw up to 30% of the credit limit from an ATM. Although it may not be enough to fulfill your company’s entire cash requirement, it will be enough to act as a trusted backup source of money when it is required immediately.

  1. Ease of Expense Management

If you’re a business owner, business credit cards can simplify your financial books incredibly. They offer features such as monthly, quarterly, and yearly financial reports that can be filtered and sorted extensively. If you have a business with different necessities, you can find the right business credit card for your needs, that can help you fund your business requirements and also help in tracking the expenses based on categories. This way, you can gain insight and be aware of the expenditures made by your employees. That said, business credit cards allow you, the business owner, to block a credit card if you detect fraud or unauthorized payment.

  1. Interest-Free Repayments

Most business credit cards allow business owners to pay for their business needs without any interest charge for up to 30 days from the date of transaction. Some business credit cards even offer an interest-free repayment period of up to 48 days. This much time is enough for a business to fuel its financial needs when required, and repay the credit without incurring additional charges.

  1. Installment Options

Suppose you, a business owner, make a big purchase for your business from your business credit card. What happens if your business is unable to repay the entire bill amount as a single payment? Most business credit cards offer installment options if a business can’t repay the bill in a single payment. The business transaction you made can be converted into EMIs (Equated Monthly Installments) depending on the duration over which you wish to repay the amount.

  1. Incentives and Rewards

Business credit cards offer a lot of perks and rewards to business owners. These incentives can be in the form of reward programs that include cash-back incentives for purchases, gift cards, merchandise, hotel discounts, car rental discounts, and frequent-flyer offers including an exemption in airline baggage fees, lounge membership, and airline miles. The rewards and incentives of business credit cards can be utilized profitably.

  1. Builds Credit Limit

Business credit cards, when used responsibly, can help you qualify for a better line of credit in the future. If the bills are regularly paid on time, the credit limit is not crossed, and the over-limit fee is not triggered, your business credit card can help you easily build a positive credit report. This can help your business qualify for a loan, often at lower interest rates. However, if you misuse your business credit cards by breaking rules or incurring penalties, it can seriously damage your credit score and potentially hamper your company’s future.

Warren Buffett once said, “Credit cards must not be used as piggy banks.” They must be used responsibly since they are a personal legal liability and can turn out to be more expensive than a credit line or a business loan. That said, a business credit card can be more than helpful for your business. In the current state of a pandemic, business credit cards can be a great help for businesses as well as employees.

To sum it all up, business owners can use business credit cards to take care of their urgent cash requirements, easily manage their finances, and have a financial cushion in times of need. Business credit cards offer interest-free credit, flexible installment options, various incentives, and profitable rewards. If used properly and responsibly, credit cards can help you build a better credit limit, which will help your business qualify for loans in the future!