Opinion: How business credit cards work for you | Premier

Key takeaways

• Business credit cards add value, from more spending power and quick access to funds, to rebates and rewards.

• The “float” period between credit card purchase and paying the statement balance can provide fund access flexibility.

• Tap into benefits like increased administrative features, fraud protection and building your business’ credit score.

What to know

Whether you’re just starting out or you are an experienced business owner, you’ve likely needed business financing to support your operations. Expenses can range from technology and equipment to staffing and inventory purchases — and everything in between. Having dependable and efficient financing can help offset the larger costs for new business owners, and the ongoing operational needs for established businesses.

Credit cards are integral

With the help of a point-of-purchase tool like a business credit card, owners can quickly access funds for day-to-day costs and manage payments. Before selecting a credit card, it’s important to review the card’s features, including credit limit, rate, use limitation, annual fees and rewards. Most business credit cards offer higher credit limits than personal cards, giving you more spending power. Additionally, business cards aren’t connected to your personal credit line, so you can make larger purchases without the worry of impacting your credit utilization ratio.

Many commercial cards do not have an annual fee, and most offer cash rebates as rewards. It’s important to take the time to consider what reward program would benefit your business the most. For example, if you’d like to maximize overall spending, select a card that allows you to earn a flat cash back percentage of total purchases. If you need more spending power, there are also consortium programs that leverage the purchasing of a group of businesses, providing the necessary scale to receive higher rebates.

Managing float

Business credit cards provide you with a tool to make business purchases immediately, without needing to dip into cash reserves right away. The credit card float period, or the time between billing cycles that doesn’t incur any charges or interest, can also be a helpful tool when balancing your income and expenses. By paying your balance before the due date, you’ll avoid paying interest.

If your payment is late, interest will accrue on the date of the first purchase in the billing cycle, not on the due date of the payment. It’s important to note that you can only utilize the float period if your balance is paid off every billing cycle. If you have an outstanding balance, you’ll be charged interest and fees as usual.

Fraud prevention

Actions like allowing employees access to personal debit or credit cards and personal account logins create risks that are eliminated with a commercial card program. And, if fraud does occur, commercial cards may have protection that can cover losses. It’s also important to note that debit card fraud immediately impacts available cash, which further demonstrates the value of using credit for business purchases.

Commercial cards allow many users within the program to view their specific purchases, while also allowing office managers and other administrators the ability to manage the program without impacting the owner’s individual credit. In addition to covering losses, some cards have additional security features that can be implemented to protect your business, like requiring the cardholder to provide a password to verify their identity.

Maintaining boundaries

With each business purchase, an owner’s personal credit score and debt-to-income ratio may be adversely impacted. These two items are both key aspects of personal finance and are reviewed and considered when securing a variety of loans, including mortgages and auto.

There is also the potential to confuse finances by inadvertently intermingling personal expenses with business expenses, which can lead to challenges in properly allocating those expenses for accounting and tax purposes. Unlike personal cards, business credit cards can help you build your business’ credit score. A strong business credit score makes it easier to qualify for business loans and you’ll receive better loans terms.

Adam McDiarmid is president, Small & Medium Business Group at UMB Bank.

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