A business credit card helps to separate the personal and corporate expenses of the owners. Besides this, they prove very useful to fund a start-up and manage cash flow during uncertain times. They also help to invest money in new projects instantaneously.
Moreover, business credit cards prove useful for managing unpredictable expenses during emergencies. Therefore, they provide financial help without the requirement of borrowing money from a known person or taking a loan.
Additionally, credit cards prove vital for managing business expenses. They also prove beneficial during trips, outings, and meals. They even provide money without additional interest rates during the promotional period.
Unfortunately, choosing the right credit for an organization is tougher compared to personal. However, a few significant tips can help to ascertain the correct organizational credit card.
5 Tips to Find the Right Corporate Credit Card
● Business Purpose
One of the most significant aspects of choosing the right credit card for an organization is the purpose. Many companies incur specific expenses monthly, quarterly, bi-annually, and annually. Unfortunately, a sales model doesn’t often cover these costs.
Therefore, business owners must recognize the upcoming expenditures, money requirement, existing cash, and emergency funds. After carefully viewing such financial details, business owners can adequately define the purpose of the credit card.
In addition to this, owners may also require credit cards for availing online and offline benefits. Businesses can save enormous amounts while making an online credit card for airline, hotel, and meals.
They may even receive cashback, which might prove useful in covering the credit card costs or diminishing future expenses. Certain credit cards also offer discounts while making an online or offline reservation.
Therefore, the corporate card owners can please clients at an outdoor meeting while receiving discounts. Another instance includes funding a business without paying extra interest through promotional credit cards. However, owners must avail of the expiry date of the free period to avoid large expenses.
Unfortunately, certain credit cards may have higher default and late payment charges as compared to others. Therefore, businesses must value these costs against the benefits before availing of the cards.
However, many service providers may even wave off and refund default charges on request. Therefore, ascertaining this factor would also help to decide whether a credit card is more suitable than others or not.
● Available Options
Business owners must show their annual personal income, company turnover, and estimated monthly spending for availing of a corporate credit card. Start-ups with funding can show relevant financial documents depicting cash flow.
However, owners may face limited options if they have high expenses or a bad credit rating. At times, businesses also require supplementary credit cards for partners. The company offering the cards would decide eligibility based on the three factors.
Unfortunately, companies also have a limit for issuing different supplementary credit cards. Therefore, owners must filter the type of card and essential members for them. Ascertaining would also help to ensure usage for corporate expenses.
On the other hand, businesses also can choose loans without a guarantor, bad credit loans, start-up loan, etc. These prove very useful as they can provide sufficient funding and come with competitive interest rates.
Furthermore, owners have the option to choose between credit builder, low rate, purchase, combined, overseas, reward & cashback, and balance transfer credit cards. Owners with a good credit rating can avail the best cards in the market and relish their benefits.
While choosing the correct credit card for the organization, it is necessary to ascertain the cost of associated insurance. There are two significant insurances, namely, payment and card protection. Cardholders can choose separate insurers for their cards; however, they may lag in certain benefits.
● Rewards and Cashbacks
As covered earlier, businesses attain rewards and cashback through various forms of credit cards. However, each of them offers a different potential. For example, specific credit cards may provide offers on miles.
On the other hand, other credit cards may offer rewards or cashback on online purchases. Business often incurs stationery, utility, machine, and other monthly expenses. These can reduce by choosing the correct credit card and managing the card debt.
Rewards and cashback credit cards can help to clear monthly balances or meeting financial ends. Another benefit could include discounts from a partner or an online website. Therefore, the business can make enormous savings.
Cashback cards help in clearing monthly debt, avoid borrowing, and maximize cashback with everyday spending. On the other hand, rewards credit cards provide points for every hotel stay, lodging, rental, etc., booking. Other rewards include gift cards for dining, rental, and merchandise. Additionally, an owner can relish service provider’s specific airline booking and make purchases using points.
● Annual Percentage Rate (APR)
Another important factor to consider while choosing the right business credit card is comparing the APR. Business owners should make comparisons of different forms of credit cards too. The introductory period of credit cards also has an ending date.
People should not become lenient while covering repayments for promotional credit cards as they have skyrocketing interest rates. According to a source, the interest can also be more than an APR on a personal loan.
Moreover, missing repayments can create a debt spiral. Therefore, compensating for the amount could become challenging every month. Therefore, business owners must find credit card service providers that offer leniency on missing repayment, scheduled date, and interest rates.
Service providers can help to estimate the monthly repayment on a credit card after applying interest rates. However, a business owner can calculate these on comparison websites. Moreover, borrowers should also remember that balance transfer cards holders can also land in a higher debt once the promotional period expires.
On the other hand, balance transfer credit cards can even reduce APR on the existing credit cards. Covering full payment during the introductory period of balance transfer credit cards helps to avoid steep payments. It even provides an opportunity to switch service provider.
Furthermore, the zero APR may not remain applicable on combined balance and purchase cards. Therefore, owners must decide the factor that holds the most importance. For example, if the company has a high spending habit but requires longer to recover the balance.
Entrepreneurs must find a combined card with a longer zero interest duration than the purchase under such a circumstance. Similarly, there are many options for low rate cards. Such credit cards provide an option of lower interest rate even after the introductory tenure.
Meanwhile, credit builder cards come with significantly higher APR as compared to others. However, these help to recover the ratings, and the owner can continue to accrue good ratings by recovering the cards monthly balance.
● Late Payment Fees and Default Charges
According to a source, there is no extra charge for using debit or credit cards since 13th January 2018. Owners can contact the Consumer Helpline to ask for steps to refund the charges if deducted.
However, the charges apply to sellers and banks outside the European Economic Area (EEA). Therefore, owners must check the details on the official UK government website. Unfortunately, business cards can still incur charges if the service provider mentions them.
Moreover, owners may incur interest on cash advances, even if they make payments before the due date. Additionally, credit card companies would provide sixty days to accept the new interest on cards. Therefore, the owner can reject the card or cover payments with the new APR post duration.
A cash advance is withdrawing physical money from an ATM through credit cards. Under such an instance, the owner incorporates higher APR, and it becomes applicable instantaneously. Moreover, the cardholder also requires to pay an additional two per cent handling fee.
Service providers also charge separately for using the card abroad. Therefore, it is crucial to check foreign transaction fee, cash advance fee, and exchange rate. Such expenses may become necessary during business trips.
Furthermore, APR on credit card cheques is higher than normal credit card transaction. Additionally, the details of the cards remain visible on such cheques. Therefore, business owners must shred them before disposing of them.
Credit card service providers would also charge APR on any remaining amount after the due date. Besides this, the credit agreement would state the date and charges applicable to the account. Moreover, the mandatory minimum payment may increase the overall payment amount.
Credit cardholders should note that the added APR amount would be greater than the existing minimum payment. So, recovering from credit card debt would become challenging or nearly impossible. Owners that make minimum repayments would also require to cover one per cent of the outstanding balance. They would also require to cover charges, fees, and interest.
If they land in an unfortunate circumstance of recovering only the minimum repayment, it is best to seek advice from a financial advisor. Fortunately, Citizen’s Advice Bureau (CAB) is a government facilitated centre that can help individuals and entrepreneurs with financial problems.