Are business credit cards a necessity?

There is a general misconception that business credit cards are just another word for credit cards for senior managers etc to give them yet another perk, when in fact both companies and employees can benefit from a business credit card, if they are handled correctly. A business credit card can be a lifeline when a company goes through a sticky patch and has a lack of cashflow, but if it is abused the charges quickly rack up and can cause real financial hardship, especially to an SME.

Whilst consumers tend to make an informed decision as you whether to have a credit card or not, for many businesses these little rectangles of plastic are a way of life. A business is very much reliant on the money it will make in the future as this is what will ensure its survival, however, speculating to accumulate is very much prevalent in business, and if you do not have the cash to pay a supplier or client the card can come in very handy to keep things sweet between you.

If you are considering getting a business credit card then there are a few important factors to look at. Think about what you will be using the card for, if you are going to use it for convenience, in that you know you are not using your own personal credit card, you will find it a lot easier than having to then go through all the paperwork to recoup your expenditure.  This caused numerous problems in the past when employees and the self employed helped out a business only to have to wait months to get their money back, if they ever did.

If you are just going to keep it for emergencies, it is a good idea to make small purchases that you pay straight off in order to build up the credit limit so if you do hit a wall and need the card to bail you out, there is a sufficient amount of funds available to make a difference. If you are also thinking of giving business credit cards to your employees then think long and hard about this, and cap the credit limits if you can as however well you think you know their staff, these will be maxed out in no time.

There are businesses of course who manage perfectly well without any kind of business credit card, and these are to be applauded considering 99% of businesses have some kind of credit line in place, be it as a buyer or a supplier.  When it comes to the question are business credit cards a necessity, it is very much dependent on the company themselves and how they operate, but those who have them see them a vital lifeline, and an effective safety cushion when times are tough.

As with any credit card, shop around to see which are the best for business use and see the perks that come with them. Take your time, make an informed decision, and make the most of your card without creating a millstone around your company’s neck.