How business credit cards can help you manage your company’s finances

Business credit cards are incredibly popular as they enable firms to improve their cash flow, allow staff to buy things without filling in expenses forms, benefit from rewards and perks, and offer financial protection on big purchases. However, to make the most of them, it is important to use them correctly.

The benefits on having a business credit card

Some companies might shy away from taking out a business credit card, not wanting to borrow money for their everyday expenses. While it is wise not to spend what you cannot afford to pay off, credit cards for business use offer a number of benefits that are worth taking advantage of:

  • Provide additional finance if it is difficult to get a loan.
  • Help small businesses and self-employed people make their payments while waiting for their invoices to come through.
  • Allow employees to book flights or buy things without all the paperwork of expense forms.
  • Give businesses the chance to monitor their expenditures with monthly statements.
  • Make it is easier to buy online or over the phone.
  • Help firms build up their financial profile and improve their credit score, which is useful if they need to borrow money in the future.
  • Offer financial protection that debit cards and cash cannot.

What security does it offer businesses?

It is a common misconception that business credit cards will benefit from the Section 75 protection under the Consumer Credit Act 1974, which states the credit card provider is equally liable for anything bought between £100 and £30,000. This is not the case.

Therefore, if something goes wrong, such as the company you bought from goes into administration, the computer equipment you purchased is faulty, you never received goods you paid for or your flights get cancelled, your company will have no benefit from having used a credit card to make this purchase. If you buy the product on a personal credit card on behalf of the business, it may also not be covered.

Some business cards also offer a Cardholder Misuse Insurance, which protects finances if an employee overspends on the credit card. You should also receive fraud protection so you will not be liable for purchases made by an imposter.

Will it incur high interest rate charges?

Credit cards typically come with interest rate charges from an APR of 16% to 26%, so it is prudent to pick one with the lowest fee possible.

However, the best way to avoid paying steep charges is by paying off the balance in full at the end of each month. If you do that, you can benefit from interest-free spending, as well as many other perks.

Most credit cards have a 56-day interest-free grace period, but it is important to pay off at least the minimum amount due monthly so you are not hit with heavy charges.

Which credit card should I choose?

Like personal credit cards, you can find several types of business credit cards:

0% interest on purchases – These are ideal for companies that need to use the card to buy goods, such as if money is tight or it is hard to manage the finances.

Reward points or cashback – If you use the card regularly, getting one that offers points or cashback would be advantageous, saving you some money in the long run. Ones that offer points that go towards flights are particularly useful for businesses that book a lot of travel. If you opt for a rewards or cashback card, they are not likely to have 0% interest on purchases, so it is imperative you pay it off in full every month.

Free incentives – You can find a huge range of incentives to take out a credit card, including preferential exchange rates, medical or travel insurance, hotel discounts and flight upgrades.

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