Business Credit Card Guide
Ask any business owner who has one, and they will tell you that a good business credit card can be an invaluable tool to help run your business. With benefits ranging from improved cash flow and better financial control to travel perks and member reward schemes, there are advantages to be gleaned from a business credit card whatever your company’s circumstances.
Key financial advantages of a business credit card:
• Many cards have very high or even no pre-set spending limits, maximising your purchase power for business supplies or expenses.
• Provided you pay your bill in full, you can expect to receive up to 56 days interest free credit.
• Using a business credit card is cheaper than continually raising company cheques for every purchase and can be used over the phone or internet
• When travelling abroad, a business credit card often offers a preferential exchange rate.
One of the main benefits of a business credit card is that it can help you to organise your company’s finances. The monthly statement makes it easy to track and identify business expenses, and some cards (such as the Amex Gold) offer extra analysis such as an annual breakdown of spending by category, while others report on other useful information such as VAT spending.
Supplementary business cards
Many business credit card issuers will also provide supplementary cards for your employees, which can save a significant amount of accounting time and simplifies the process of administrating employee expenses. Each cardholder is allocated their own personal spending limit, which can be changed at any time, and it is also possible to place limits on different types of spend. Spending on supplementary cards will also usually count towards any reward schemes that accompany the credit card.
Fraud and purchase protection
Credit card issuers have anti-fraud systems in place designed to protect you from unauthorised spending anywhere in the world. Provided you report the fraud within the designated amount of time, you will not be liable for the money spent. Some business card issuers also offer Cardholder Misuse Insurance, to protect against the unlikely event of employee misuse. The MBNA business credit card offers this facility, and you can also opt for purchase protection, whereby every purchase you make is automatically covered against loss, damage or theft for up to 90 days.
A word of warning – choose carefully whom you entrust with a business credit card. Once an employee has a business card, you are giving them license to make decisions on company purchases and to authorise the payment. You may also be liable for any fraud committed as a result of employee negligence in keeping card details confidential.
If you and your employees frequently travel on business, you should consider the various travel benefits that come with different business credit cards. MBNA Business Credit Card and Alliance & Leicester Business Credit Card both provide free worldwide travel and medical insurance, and Amex Gold Charge Card offers a comprehensive travel package. MBNA also currently offer 20,000 free destinations miles when you open a card, followed by one mile for every pound you or an additional cardholder spends. Look out for other travel perks, such as hotel discounts, flight upgrades and concierge services.
Discounts and reward schemes
With a business credit card, you can often access the kind of discounts usually only available to large corporations. Dell Computers, Best Western Hotels, FedEx and Ryman office supplies are among a number of companies offering special rates to holders of certain business credit cards. Check with the individual credit card issuers to find out who offers what.
Some cards are also affiliated to existing rewards schemes such as Nectar or Air Miles, so points from your business spend can be added on to any others you may have accrued elsewhere. American Express also runs its own members rewards programme, where your points can buy you luxury items such as fine wines or short breaks.
Business-related services on offer include a free legal and tax help line, which is available to holders of the MBNA Business Card.
Factors to consider when choosing a business credit card
The card you choose will depend on your main motivations for getting a business credit card. If you need to make use of the lending facility, then your main concern will be the APR offered. Don’t be distracted by attractive introductory rates – they will usually not work out cheaper in the long run, so it is best to go with the card offering the lowest regular APR. Other charges you may incur include annual membership fees and late payment penalties, and these will vary between card issuers.
If you anticipate paying the balance in full every month, then the rewards packages and supplementary services may be of more interest to you. Also consider the format of monthly and annual statements, and pick a business credit card where these reports can most easily be integrated into your business’s accounts. Some cards will customise these to your own individual requirements. If you are applying for supplementary cards, check whether you will receive a clear breakdown of spending for each cardholder.
Finally, only accept a credit limit that you can realistically afford to pay off, even if you are offered more. Calculate the maximum amount of spending per month that the business will need to make and apply for that amount. If you default on repayments, the credit rating of your business will be damaged, and paying only the minimum balance will see the interest rapidly build up.
|Cards||APR Variable||Intro Rate||Balance Transfer||Cash Back||Loyalty|
|British Airways Credit Card||15.9%||0%||YES||Apply|
|American Express Express Rewards Credit Card||17.9%||0%||NO||Apply|
|AA Balance Transfer Card||17.9%||0%||0% 16 months||0%||YES||Apply|
|American Express Platinum Cashback Credit Card||18.7%||5%||NO||Apply|
|American Express Nectar||25%||0%||YES||Apply|
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