Introduction
So many small businesses are established every year, and the basic requirement for this would be a Business Credit Card. A Business Credit Card is an ideal way to keep a track of the credit history, the credit score and all the financial dealings that take place throughout the business tenure.
Some of the advantages are:
- There is a clear demarcation between a personal account and a business account; there would be no intermixing of any financial accounts.
- For the benefit of any business, what would be of most importance is the credit history and the credit score. That would be tracked down by the credit bureau. Having a credit card would help the business in building a good history, for future purposes as well.
- There are immense rewards, cash back, points and discounts that you can avail.
Business Credit Cards & Their Uses
Most of us have these little dreams like setting up our own businesses, and one day when the time is ripe and lady luck is on our side, we divulge into it and strike gold. A general misconception is that if the business is small, we do not need a hi-fi system keeping an account of all the financial transactions. However, small the business might be it is really essential to keep a track of all the business transactions, for the welfare of both the businesses’ as well as yours.
Anything concerning money has to be accounted properly for. Moreover, all monetary gains and returns have to be highly accurate, and maintaining this accuracy would benefit the business. Now this doesn’t mean that you have to start running around and searching for an accountant to handle this. However in a small business you do not have to go to the extent of hiring some person for this job, or spend days together racking your brains as to how to keep a tab of these accounts. The simple solution is to get a Business Credit Card.
a. Business Credit Cards:
Business Credit Cards can be simply defined like this. The cards used purely for business purposes, transactions & purchases are Business Credit Cards. These cards also offer points that can redeemed for specific business purchases. Business personnel usually take upon these Business Cards in order to separately deal with the funds ensuring that there is no mingling between personal use and business use.
Though the definition may sound simple, a business credit card has many particularities that you need to pay attention to. In this section we will deal with, what you can do with Business Credit Cards.
Most of the businesses start as small ones, and then they expand beyond their limit. All that happens in a small business however is crucial when you want to establish a bigger business, including the credit report, history etc.
- Most often as it happens in businesses, you may really need the item, but you may not have enough money for purchasing, in such cases you can use your credit card, and later pay the amount, as soon as you get your payments.
- In small businesses, the business and personal accounts usually gets mixed up, but there should be a total difference between them both. A business credit card can help in keeping a track of all the transactions. Sometimes manually maintaining a record is also possible, but with the business credit card, there would be absolutely no errors, and at the end of the month you will get a detailed account of all that is used.
- All business credit cards are usually in coalition with other businesses such as Airlines, Grocery Stores and retail stores, where you can avail rebates, Cash back, discounts and much more. There would be a lot of points that can be earned, and that can be redeemed. Based on the nature of your business, you can select a business card that can be of help to your business.
- A business credit card will help you tackle emergency situations.
- When more than one person handles the finances, the credit card would serve as a suitable option for all business dealings. Your employees can also use a business credit card, and it can also be a check on how much they are using.
- You can keep a control on your credit usage, and have a limit beyond which, that amount will not be permissible.
- You can make your business famous, as the name of your company, will get to be known every time you use your business credit card.
- If you are regular in your business credit card payments, the lenders will have no problems with lending you bigger amounts of money next time.
- It makes your life easier, for tax payments.
- Most business credit cards have interesting introductory offers, 0% APR, 0% interest rate, that will last for an initial period of time. You can make the most of this initial stage and purchase as much as you can, since your interest rates will be low.
- It is easier to make payments online, which can be facilitated with business credit cards.
The best thing about a credit card is having all payments, transactions and other details recorded by the credit bureau, and all this information is compiled in the form of a report when needed. Whenever you need a loan sanctioned, what will be scrutinized is the credit history, and you need to build up and work on a good credit history in acquiring loans. A good credit score interprets into a good usage of a credit card.
b. Introductory Rate Of Business Credit Cards:
As mentioned earlier, credit cards have many introductory offers, where the APR is minimal, and there is even 0% balance transfer rates. This however is for a specific period of time, after this time ends, there would be standard APR charges. Thus, small businesses can acquire expensive purchases during this initial introductory period.
Choosing The Right Card
Choices! Choices! We start our day by making choices and even end the day by doing the same. Choices on what to eat, or what to wear maybe some minor choices to make, but when it comes to choosing a credit card you better be careful. If you get stuck with cards with high interest rates or no rewards at all, you will be left repenting at leisure! Carry out a detailed research, and checking out the pros and cons of everything. There are certain criteria that you need to determine before choosing a credit card, and these are as follows.
You can select a credit card based on the following:
- Rewards, cash back, discounts, air miles, coupons, retail products, rebates etc. This helps you to save immensely, as you have the option of choosing your credit card based on what you can acquire.
- One important factor for choosing a credit card is checking for the Annual Percentage Rate (APR).You can opt for a credit card with a relatively low APR.
- If your business would require traveling abroad and also entail purchasing, then it would be ideal for you to get the get a credit card that permits purchases overseas, i.e. the issuing bank should be global and renowned.
- If your business requires you to make online payments, then the credit card should be from a well accepted issuing bank.
- Check out the rate for the annual fees.
- The introductory offers for credit cards are very attractive, like low APR, no interest, many rewards facilities and more. You can choose a credit card based on this as well; however you while choosing the credit card, you should also keep in mind that should be careful that after the introductory period is over, what the charges are like.
- Depending on these offers as well you can make your decision.
- If your employees have access to making payments, then it would a business credit card, would serve the purpose, as wherever they are they can use it, and you can keep a check/limit on their use.
- A credit card that issues monthly, quarterly on annual reports, so that you can have an evaluation the way you use your credit card.
- Ensure the cash withdrawal option on the credit card, and if your business requires drawing out cash, ensure that there should not be a huge fee deducted for this.
- Choose a credit card that offers you ample amount of time as grace period.
Other Alternatives
- For business purposes, you can also try using a corporate card, which means that there will not be any interest rate that will be charged, however there would be a regular fee that has to be paid.
- Charge Cards lasts for a short time only like a month’s time. A charge card allows loans however the payment has to be made at the end of a month and there would be no carry forwards and interest charged for this.
Applying For One
As business personnel, you cannot go with bags of money for making any purchases especially if you are out of town or away abroad. Something that is handy, which can be with you all the time and is the most feasible is the credit card. The business credit card however is the easiest way to make all the possible transactions, withdrawals and deposits that are usually relevant to the business.
What are required for obtaining a business credit card are the social security number and some other details like the tax ID papers. There is a common misconception about credit cards that only business owners or those involved in a business can have a business credit card. However this is not the case, as a business credit card can be obtained even by an individual, as a business can also be individualized.
Business credit cards however are targeted for business people and all the rewards and offers are aimed at keeping the business personnel in mind. Moreover businesses require higher credit limits, which are obtainable on business credit cards. However ensure that you get a detailed bill and clear accounts at the end of the month.
For application you will have to provide some financial information of your company, and other details regarding your business, so that a business credit card can be issued. You also have to furnish some personal details. Before you apply it would be ideal to browse through all credit card options, either online or check out from varied issuing banks and finalize your decision.
Business Credit Card Processor
When everything seems right about the business credit cards, it would be right to have a good “credit card processing’ as well.
a. The Basics of Credit Card Processing:
- Get a merchant account.
- It would be ideal to open a merchant account with the well established Visa, MasterCard, American Express and Discover.
- Online processing is the simplest and easiest way of processing,
- The phone processing also serves as an alternative way of processing.
Once you are settled with your business processing system, you need to check the rates beforehand. If you agree for with the bank, it would be difficult to break away from it later on. The usual range of a fee payment, would be around 1 -2 % for every credit card transaction. However if the payment is below 1%, it means that there would be some additional fee charges.
In case of online purchases, you can use intermediary sources such as PayPal or others that accept payments. These charges would be more than the regular payment. However the fees alone should not be the determining factor for making payments.
Between the payments there usually is a lag time, which is nothing but the time period during which you do not have receive any the payment. Be sure to check the lag time and try to settle for a less lag time. It is also preferable to ensure that the credit card processor can check for any frau payments.
b. Online & Phone Processing:
If your business has a website, with the availability of buying products online, the online processing would involve having a facility that accepts payments. The shopping cart would enable online payments. The processing could be through the phone as well. For the online and phone processing you would require certain amenities like having the internet and phone facility.
Earning Rewards
Who dislikes receiving gifts? Who would not want to obtain things that are practical and that they can benefit from immensely? That’s the good things about credit cards! As you keep using credit cards, you can earn things for yourself. Cash back refer to the rewards that can be acquired for the use of a credit card. The credit card company rewards you in a small way you for using the credit card through the cash back. You can earn as many as rewards that are offered.
Most people think that there is a catch in earning rewards that earning rewards is all just to attract people to use credit cards, or that is actually nothing you derive out of credit cards. You maybe mistaken as there is a lot to earn in cash back and credit cards. As a matter of fact, there would be a lot of saving for your business, and this would mount to gaining huge profits.
Cash back rewards are usually gas rewards, grocery rewards or even air rewards. Depending on what you use the most and what you would use the best you can choose a cash back reward. The cash back should be a benefit to your business not something that would not serves its purpose. If your business would require frequent traveling then you would benefit from the travel cash back rewards, and if your business requires frequent traveling by road, gas rewards would be resourceful.
However this does not mean that you would have to keep spending indiscriminately just to earn as much of cash back. It would be ideal to check the cash back options and other conditions before divulging into the credit card options facility. The world of credit cards is huge, where credit card issuers and banks are at their best in enticing customers and becoming extremely customer-conscious. In order to get many more customers, amongst this massive competition, they have devised ways and means of offering customers incentives and perks, in the form of Cash Back.
Different companies have different policies, but in general it is for every dollar spent, a point can be earned, or even two points can be obtained with a single dollar. Check the incentives, before applying for a credit card, as some offer rewards that are very store specific, some give you the option of buying from any store. The rewards however are time specific that has to be used within certain period of time.
a. Types of Rewards:
The rewards are many and are broadly listed into the following.
- Travel -Travel rewards are of an immense help. Discounts are obtained right from booking, planning the itinerary, internal travel charges within that place coverage over lost baggage, travel accident insurance to even phone calls and other necessities that are likely to be made on the journey. For Frequent air travelers you can earn air miles, and in order to travel completely free of cost you can keep collecting these air miles.
- Purchases - Some credit cards offer you rewards over purchases made over products or by using some services. This usually is of immense benefit, as you can derive heavy discounts, get rebates and even get the products at a minimum cost.
- Driving - These rewards relate to getting discounts, concessions and rebates on gas purchases. Sometimes there are incentives over hiring vehicles, auto rentals and also other travel facilities.
- Restaurants - Credit cards can also have rewards that can be used at restaurants.
b. What You Can Gain From Rewards?
Having a business card is ideal for businesses, especially small businesses. There will be a separateness in the financial dealings, which usually gets intermixed with personal dealings. The most effective reason for having a business card would be earning rewards, as the rewards are all business associated. If the rewards are chosen carefully then, the rewards would be of immense benefit to the business, in terms of traveling, cash back or even purchases made. The rewards would give you a sense that for all that you are spending, you are earning at the same time.
Additionally you can also get the following:
- You would be able to keep a tab over all your financial dealings of your business, which otherwise would be a difficult task.
- If the rewards do not interest you or are of no use to you, you can gift them or give them to others that can make good use of it.
- The 1-5 % cash back is a highly useful.
- In case your business requires your employees also to make payments, the credit card is the best way to do so, as you can keep a track of their payment option.
Financing with Business Credit Cards
So once you are all geared up to start your own business, then the problem lies in actually getting financial sources to fund it. The alternative for financing your own business is going to a bank and asking them to finance your business. However, since this is a new venture, banks would usually not oblige in providing funds for customers at this stage.
The easiest way then for starting your own business would be to acquire a business credit card, and gain from these monetary returns. Without waiting for much time to get permission or the amount sanctioned you can get started on your business. Statistics show that many small time businesses are widely getting established, and are progressing after the advent of a credit card.
Apart from getting money, there will also be an accurate record of book keeping, and this will be mailed you at the end of the month. You can enjoy all the privileges in terms of the rewards, discounts, rebates, offers, air miles and other benefits that you can earn.
For a business what is usually required is some basic paraphernalia to start out with, which can be acquired by a credit card. You can purchase all that you need with a credit card and keep paying monthly installments, which is a possible and feasible option with the stores from where you are buying them from.
If the budget is low and you have multiple credit cards and easy and feasible option out is to use one credit card for a purchase, and then pay up by using credit from another credit card, and use a third credit card for all the prior payments. In this way you can get an extended period of payment time.
a. Precautions for Business Credit Cards:
- The general tendency that people have when they have a credit card handy is to use it to the maximum. They usually overspend, more than that they can pay. Same is the case with a business credit card, where sometimes the case is using the credit card without any limit. This will eventually result in delayed payments, higher interest rates and would spoil your business credit history.
- Do not exceed your credit limit.
- Do not mix your personal credit with the professional credit.
- While selecting and finalizing on a credit card, be careful in choosing the right credit card so that you do not get stuck with a credit card with high interest rates or no rewards. Think carefully and make the right choice.
- Pay up your bills consistently and on time.
- If you are still planning on a business, try to keep your personal credit card score high, so that your business credit card will be in lieu of your personal card history.
b. Advantages of Business Credit Cards:
- You can easily acquire a business credit card.
- The application process is easy and not laborious.
- You can avail all the discounts, rewards, rebates, offers and other options available on your credit card.
- Float time – you can pay within a month’s time or more
- You can keep a tab over your expenses.
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