Business Credit Cards: How To Choose the Right One for You

Financial tools that encourage a cashless economy are highly in focus today. Every individual either has a debit card, UPI, or digital wallet to make payments on the go, eliminating the need to carry cash. However, debit instruments differ from credit instruments as the latter can make provisions for your need for capital even when your account balance is zero. Credit cards are the need of the hour for every business owner due to the number of benefits they can provide in the short and long term.

However, there are a few things you need to keep in mind before applying for business credit cards. This article will help you with every piece of information to help you pick the right card for you!

Types of Business Credit Cards

1. Cashback Business Credit Cards: Such cards are designed to help businesses save money on expenses. These cards offer money back on business purchases, and the cashback amount varies depending on the card. 

2. Rewards Business Credit Cards: These credit cards are designed to help businesses earn rewards on their purchases. These rewards can be in the form of points, cashback or any other reward and can be redeemed for travel, merchandise etc. A few companies give higher rewards for specific categories like dining or fuel.

3. Travel Business Credit Cards: Such cards help businesses save on travel expenses. These cards have rewards like points or flyer miles, which can be redeemed for travel expenses like flights, hotels, and car rentals. Travel credit cards also provide benefits like airport lounge access or travel insurance.

4. Balance Transfer Business Credit Cards: Last but not least, these cards are designed to help businesses transfer high-interest debt from other credit cards or loans to a new card with a lower interest rate. This can help businesses save money on interest and pay off debt more quickly. 

Factors to Consider When Choosing a Business Credit Card

1. Credit Score and Business History: Your business’ creditworthiness and financial records will be crucial in determining your eligibility for a business credit card. Before applying for a business credit card, it is important to check your credit score and credit report to ensure no errors or discrepancies could affect your application.

2. Annual Fees and Interest Rates: Business credit cards often come with charges that can significantly impact your business finances. Before choosing a card, it is important to compare the fees and interest rates of different cards to find the one that provides the best value for your business.
3. Credit Limit and Spending Capabilities: A business credit card’s borrowing limit and spending capacity will depend on your credit score, business revenue, and other factors. It is important to choose a card with a credit limit that matches your business’ expenses and revenue.

4. Customer Service and Support: Good client management teams are essential when choosing a business credit card. Look for a card issuer that ensures 24/7 customer support and online account management tools to help you manage your business finances effectively.

Best Practices for Using a Business Credit Card

1. Make a budget that you can stick to: Before using your business credit card, it is important to create a financial strategy you can follow. This will help you avoid overspending and accumulating unnecessary debt that could hurt your business finances.

2. Don’t leave overdue bills: Paying your due amount before the deadline or without outstanding balances is crucial for maintaining good credit and avoiding late fees and penalties. Make sure to set up automatic payments or reminders to ensure that you never miss a payment.

3. Keep Personal and Business Expenses Separate: This is a crucial step in managing your business finances and avoiding potential tax implications. Use your business credit card only for business expenses, and avoid using it for personal use.

4. Review your Statements Regularly: Tracking your expenses will help you monitor your cash flow and identify fraudulent charges or errors. Review your statements every month and report any suspicious activity to your card issuer immediately.

5. Keep track of your card’s Rewards and Benefits: Keep track of your business credit card’s rewards and benefits, such as cashback, points, and flyer miles. This can help you maximise your rewards and use them to offset your business expenses or invest back into your business.

How to Apply for a Business Credit Card

1. Weigh multiple card companies and their offers: Before applying for a business credit card, it is important to do homework to find the best one for your business needs. Consider rewards programs, annual fees, interest rates, and credit limits. Look for a credit card that suits your business spending patterns and gives rewards that you can take advantage of.

2. Compile your documents: Once you’ve found the right business credit card for your needs, collect all the details and paperwork needed to complete your application. This may include your business’ tax ID number, financial statements, bank statements, and other relevant documentation.

3. Apply online or physically: Many banks and credit card companies provide online applications for business credit cards, making it easy to apply from the comfort of your office. However, if you prefer to apply at the bank, you can visit a bank branch or meet with a credit card representative to complete your application.

4. Wait for your card’s approval and activation: After submitting your application, you’ll need to wait for the bank to approve it. This process can take time, depending on the credit card company and your business’ credit history.

How to Maximise the Benefits of Your Business Credit Car

1. Take Advantage of the Card Benefits: Rewards on credit cards may include cashback, travel rewards, and other perks. Take advantage of these rewards and benefits by using your credit card for everyday business expenses.

2. Use Your Card for Everyday Business Expenses: To get the most out of your business credit card, use it for daily business expenses such as office supplies, travel expenses, and other business-related purchases. This will help you accumulate rewards points or cashback while keeping track of your business expenses.

3. Manage Your Credit Utilisation Ratio: Keeping your credit utilisation ratio low can help you maintain a good credit score and increase your chances of being approved for future credit. Aim to keep the ratio below 30%.

4. Evaluate Your Business Credit Card Annually: As your business evolves and grows, your credit card needs may change. It is a good idea to re-assess your credit card annually to ensure it still meets your needs and offers the best rewards and benefits. Consider switching to a different business credit card if you find a better option or your business needs to change.

Final word:

Now that you know everything there is about the kinds of credit cards available for businesses in India, why not give them a try? Research your options thoroughly before applying, and ensure you read the terms and conditions properly!