Business Credit Cards

Business credit cards provide a simple and efficient means to pay for business goods, services and expenses using a credit facility.

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Key Features

Business Credit Cards are an excellent way for a business to monitor expenses and costs it incurs on expenses. They reduce the need for petty cash and cheques and offer great discounts and rewards ideally suited for the business.

They differ from personal credit cards in a number of ways. Business Credit Cards are issued on a company's credit rating, rather than the individual's. Typically they have spending controls for example, cash withdrawals from ATMs and other predefined types of trade.

Business Credit Cards offer detailed management information that simplifies tracking of expenses, often enabling significant cost reductions for the business. They can also offer insurance policies and discounts that can be tailored to suit each individual businesses needs.

Generally business cards can be classified into two types:

Credit cards - with credit cards it is possible to pay a minimum payment and carry the remaining balance forward to the following month. The card issuers charge interest on the amount carried forward.
Charge cards - the entire balance is settled each month by Direct Debit. Consequently no interest is charged on the balance.

The financial management potential of Business Credit Cards ultimately simplifies the running of the business and enables accurate tracking of expenses, saving the business valuable time and money.

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Who is it for?

Business Credit Cards are suitable for any type of organisation from small local businesses to large multinational organisations.
Organisations with overseas trade can choose a 'lodge account' that reduces costs and allows control over the corporate travel policy.

Benefits

Financial Management - Business Credit Cards significantly improve financial control. Most business cards now offer free management and reporting services, considerably simplifying financial management
Reduced dependency on cash - Business Credit Cards reduce the need for cheques and petty cash for day-to-day activities. Credit cards can eliminate the need for travellers' cheques and foreign currency.
Less admin - Recent research by the Henley Centre shows that time saved on administration expenses saves a business £302 per annum per typical senior manager.
Grow with your business - It is simple to arrange supplemental cards for new and existing employees in line with the company's growth.
Discounts and rewards - Credit card companies offer discount rates of up 30% on many products and services. Individual card holders can also earn rewards through reward programmes that come with most cards.

Things to watch out for

Supplementary cards - some card issuers issue a fee for adding on additional cards to the accounts
Protection - unlike personal credit cards, charge cards and debit cards offer no protection i.e. from supplier activity such as late delivery, faulty products or insolvency.

What are the next steps?

Determine credit limits. Estimate as accurately as possible how much the business can afford in monthly payments and how much the maximum credit limits should be.
Number of cards. The business will need to decide on how many of the company's employees should be allocated a credit card and if there should be any differences in spending limits between the employees.
Particular requirements. Does the business has any particular requirements? For example if the credit cards will be used to pay for flight travel expenses, a 'lodge card' could be the best option for the business. The discounts and rewards offered with certain cards, should be chosen to reflect the needs of the business.
Identify additional costs. Consider all issues pertaining to the card such as reporting of expenses, any additional hidden costs, break clauses etc.

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Frequently asked questions

Do I need to be an account-holder with the bank to be eligible for a business credit card?

Some issuers require that the business holds a current account with the bank in order to take advantage of their business credit card account. Other issuers, such as Barclaycard Business, do not have this as a requirement.

Do Business Credit Cards offer protection from fraud?

Business Credit Cards come with no liability clauses for fraudulent use, if they are lost or stolen, providing the issuer is notified as soon as possible. To protect against unauthorised e-commerce transactions some business card providers have an online guarantee that can cover unauthorised transactions.

Can I apply for more cards?

Business Credit Cards make it possible to add supplementary cards should the business require more cards over time. Some issuers charge an additional fee per card, whereas others do not. This will be stated in the terms and conditions.

What can I buy with my business card?

Business Credit Cards can pay for virtually any kind of business expense ranging from travel expenses, such as booking hotels, restaurants, car rentals, rail and air travel, office equipment etc. Business Credit Cards can even be used for cash withdrawals through ATMs if authorised by the company.

How are the expenses tracked?

Most issuers provide monthly statements that contain individual cardholder statements. Some Business Credit Card providers also offer electronic monthly, quarterly and annual management reports, to assist cost analysis and budgeting.

Glossary

APR - the annual percentage rate is a comparative measure expressed as a percentage that allows comparisons between card issuers. It is the amount of interest that is charged on credit and thus effectively the cost of borrowing.

Business charge card - is suited for smaller business. No interest is charged on charge cards as they are settled automatically each month usually via Direct Debit.

Credit card - allows purchase of goods and services to be repaid at with an interest charge.

Lodge card - ideally suited for business with large turnovers that also do a significant amount of travelling to foreign countries.

Issuer - any bank, building society or other financial institution that offer plastic cards are issuers.

PIN - stands for Personal Identification Number and is used in most card transactions following the introduction of Chip and PIN.

Purchasing card - are cards designed to assist in purchases of small value but high volume purchases such as office equipment.

Spending limits - the business can decide on individual spending limits for each cardholder. This is an effective tool in controlling costs.