Is business credit card helpful?
‘Yes’ –is the answer that’s comes out almost immediately. That is true at least for most businesses (especially small businesses). Before we delve deeper into how business credit cards are helpful, let’s try and understand what a business credit card is.
Put simply, a business credit card is a credit card that is owned by a business and not an individual. To understand this better, you can simply draw an analogy between the business credit cards and business bank accounts, which are in the name of the business as well. Other than that, business credit cards work in pretty much the same fashion as the personal credit cards; with a few exceptions. These exceptions are in the form of flexibility in credit limit, low APRs and some other additional benefits that are available to business credit cards only.
Even from just that, business credit cards seem a good proposition. However, business credit cards would be attractive even without those benefits because the main benefit lies elsewhere. The big-big benefit from a business credit card is realized in terms of business expense accounting. For most small businesses, business expense accounting is a big overhead. With business credit cards, this is handled very easily – you just have to ensure that you make all your business expenses on your business credit card and let the personal expenses be on the personal credit card i.e. segregation of business and personal expenses is all you need to do. So the bill for your business credit card will have all the business expenses on it and you wouldn’t need to collate all the various bills or sort out the items from your personal credit card bill. The key here is to make sure that you use your business credit card for all your business expenses (or as much as you can). Moreover, a lot of business credit card suppliers realize this need of small business and even organize the business credit card bills in a way that meets the accounting requirements of these businesses. So mostly, they will appropriately group the expenses on the business credit card bill so as to facilitate business expense accounting. In fact, some of the business credit card suppliers go to an extent of providing the bills in a format that can be downloaded and exported to an accounting system i.e. you don’t need to enter the data manually in your accounting system. In case the format is not suitable for your accounting system, you can hire a software professional to write a small quick program to convert it into a suitable format.
Thus just one reason – ‘facilitation of business expense accounting’, is enough to support the case of small business credit cards.
“We accept credit cards” is a statement that you must have come across multiple times at various shops, grocery stores and other merchant outlets. This statement is generally accompanied by a few stickers (Visa/Master card etc.). Credit cards have transformed the businesses and our lives to a great extent. A few years back there were just a handful of shops that would accept credit cards but today you will find that most of the shops accept credit cards. In fact, some shops (like those belonging to a big retail chain) not only accept credit cards but also supply credit cards. These credit cards entitle you for rebates when you use them at any of the stores of that retail chain.
With credit cards around, a lot of people have stopped carrying any cash with them or just carry a very small amount of cash with them. That means that any shop that doesn’t accept credit cards is potentially losing customers. In fact, this is one reason why almost every merchant accepts credit cards.
With the evolution of internet, credit card industry too took a new turn and up came ecommerce and e-shops. So, those stickers of “We accept credit cards”, moved on to the doors of internet shops. Thus came the era where almost every online-shop would accept credit cards (directly or indirectly). In fact, this was the premise on which the complete online-business industry was based. This is convenience at its best.
Fraud is associated with almost every financial instrument. So there came fraudsters too, who too said that “We accept credit cards”. These fraudsters use a lot of techniques to commit credit card related fraud. Some of them disguise themselves as online merchants who accept credit cards as mode of payment (the actual motive being extraction of critical credit card details). Others are people who work at merchant shops that accept credit cards. These fraudsters either clone the credit cards or just note critical information from them (and use that for online-shopping). Some other fraudsters lure innocent people into revealing credit card details in chat rooms. And then there are tech-savvy fraudsters who use computer programs/software/devices (called spyware) to spy on the people who use their credit cards for online payments. The spyware capture their credit card information and get it transmitted to the spy using internet.
So a lot of merchants and service providers do accept credit cards but keep in mind that the fraudsters too welcome/accept credit cards. This is something you surely need to be careful about.