Hi there! As you have come across this page, I’m assuming you might be a business owner / sole proprietor who is collating information regarding a business credit card. There must be several questions crossing your mind right now:
Why should I buy it?
What points should I keep in mind while purchasing it?
What are the best practices for a business card user?
Which are the top business cards in the market?
Well, mymoneykarma is here to answer all your questions one by one. Let's begin.
Segregate Business from Personal Expenses
Consider a situation where you are the founder of your start-up, and you make all of your payments, whether personal or official, through regular credit cards. Wouldn't the process of tracking both the expenses be cumbersome?
Hence, to keep your accounts separate; it's better to get a business credit card.
Get Perks and Rewards
When you spend an enormous amount on shopping for business essentials, then why not reap the benefits? Here are the perks that the credit issuers provide to their customers:
Complimentary access to airport lounges - domestic and international
Priority pass membership
Dining, shopping, and movie vouchers
Discounts on hotel and flight bookings
Access Short-Term Loans
When you start a business, at least initially, the income remains inconsistent. During that time, you may need money to meet the overhead expenses, vendor bills, etc. Overlooking them would definitely jeopardize the flow of business operations. At such a juncture, a business credit card can provide you access to a short-term loan until the next payment comes into your account.
Build Your Business Credit
A business credit card helps you in establishing your business credit profile.
The business credit rating is like a personal credit score; the only difference is that it is formed based on the financial activities of the business as a whole.
If it is low or average, it impacts your ability to get qualified for a business loan at a low interest rate.
Compare the costs, annual fees, and interest rates of various business cards before finalizing your choice. Track your business expenditure first to find the right kind of credit card.
If you need to travel overseas for work, check the global acceptance of the card as well. Also, ensure that the business card you choose reports credit activities to the bureaus.
Pay on Time
Now, this goes without saying. Pay off your dues on time to avoid paying late payment fees. Also, try to pay more than the minimum due amount so that you don't have to pay a high APR or annual percentage rate (APR is the interest that accrues when you don't clear the entire balance.) A delayed or missed payment can harm your business credit score significantly.
Purchase Only Business Essentials
Don't use your business card to pay for personal expenses such as flight or hotel bookings for vacations, as it would make your financial management process cumbersome. Remember that one of the uses of a business card is to separate your personal and business lives in the first place.
Monitor Your Credit Report
Keep a tab on your credit score once you start using the card. Any slump in the rating can affect your future credit applications. In case you observe any errors in your credit report, inform the lender immediately.
Keep Credit Utilization Low
Though the credit limit on business cards is generally quite high, you need to take care of the credit utilization ratio, which should ideally be below 30%.
Going beyond this percent can push you into a debt trap, as you may find it hard to pay on time.
Kotak Mahindra and American Express have numerous variants of corporate and business cards, which offer substantial perks and rewards. Here are some of them:
Corporate Wealth Signature Card
Corporate Platinum Credit Card
Corporate Gold Credit Card
American Express Corporate Card (Gold)
American Express Corporate Meeting Card
American Express Corporate Purchasing
American Express Corporate Card (Green)
A business credit card can streamline your finances if used responsibly. Hence, choose the card that suits your requirements and helps you in establishing a strong credit profile. If you are wondering where to check your business credit report, contact credit rating agencies such as Experian, CRISIL, and ICRA.