Business credit cards are financial tools designed to meet the specific needs of businesses, such as startups, small businesses, and large corporations. Business credit cards enable business owners to manage expenses, track spending, and separate personal finances from business transactions. These cards usually have higher credit limits than personal credit cards and rewards tailored to the business. Additionally, these cards also have features which aid business operations such as employee expense management and detailed financial reporting.
Key Features of Business Credit Cards
1. High Credit Limit: The credit limits on business cards are relatively high compared to personal cards since large amounts enable business entities to spend on building up inventory, travel, or other major expenses.
2. Expense Reporting and Management Capabilities: Most business credit cards have expense tracking capabilities, which allow better budget management and aid the business in tax planning.
3. Employee Cards: Business credit cards generally allow the creation of additional cards for employees with flexible spending limits to ensure the business is not overspending.
4. Business-Related Rewards: Business credit cards generally offer rewards which align with business needs, such as cashback on office supplies, travel discounts, or points on advertising spending.
5. Detailed Statements: Monthly detailed statements enable business owners to track and understand spending habits and areas where savings can be achieved.
Business Credit Cards Vs. Personal Credit Cards
1. Intended Purpose
Business credit cards are used only for business purposes, like buying supplies or paying vendors. Travel expenses of employees and other business purchases can also be covered using these cards. On the other hand personal credit cards can only be used for individual consumers and are designed to meet personal requirements, such as groceries, rent and other such requirements.
2. Credit Limit
Business credit cards generally offer a much higher credit limit, since a huge amount of money is often needed to cover the operational costs of a business. On the other hand, personal cards offer a lower credit limit as they relate only to individual spending.
3. Rewards and Perks
Business credit cards offer rewards that cater to both professional use and needs-such as discounts on office supplies or travel-related benefits. Personal cards focus on lifestyle rewards like dining, shopping, and entertainment.
4. Liability
Business credit cards may have liability differences. Some cards make the business owner liable for the outstanding balances, while others separate liability, keeping it limited to the business entity. Personal credit cards always hold the individual cardholder liable for any debt incurred.
5. Employee Access
Business credit cards offer access to multiple employee cards linked to the primary account but usually have an individual limit on spending. Personal credit cards do not have such a feature.
Special Tips to Use Business Credit Cards
1. Choose a Card That Suits Your Business Needs: Go through your business expenditures and then choose a card that provides rewards in categories of your business expenditure. For instance, if you travel more, you should opt for a card which offers rewards on travel expenses.
2. Employee Credit Limit: To prevent employee over-spending, use spending limits if you issue cards to employees.
3. Categorise expenses: Use the business credit card in line with reports which categorise spending to make book-keeping easier and aid tax preparation.
4. Fully Pay Balance: Avoid paying off your credit card dues in installments. Doing so will also help you prevent high-interest charges which may erode profits. Timely payments also help in creating a good credit profile for your company.
5. Regular Monitoring: Monitor the monthly statements for any unauthorised transactions or opportunities to save costs.
Why Keep Business and Personal Finances Separate?
Keeping business and personal finances separate is important for effective financial management. Using a business credit card will ensure that all professional expenses are recorded in one place, thus making it easier to track spending, prepare budgets, and file taxes. Besides, maintaining this separation also helps to build a business credit profile, which will be useful in securing loans or financing in the future.
