Does Your Business Need a Credit Card of Its Own?

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Business credit cards are one of the most popular financial products in the industry. Banks and lenders offer special discounts on the cards if used for expenses that support the business. The interest rates, repayment terms, and policies are all different from a regular credit card offered to the common public.

However, certain risks are associated with the use of credit cards that create doubt among business owners. Their interest rates, financial stress, and impact on credit ratings are significant reasons loans are preferred over them. Nevertheless, it would help if you had it at some point to pay the dues or buy something for the business. 

This article discussed the benefits and drawbacks of a credit card to create a clear picture of their application to your business.

Business Credit History is Built with Credit card

Credit card payments on time will reflect positively on your credit history. It will make you a preferred borrower. You will find favorable terms and interest rates on business loans in future.

However, excess use of the credit limit will make you look credit hungry. Also, you must make payments on time to ensure the credit ratings doesn’t take a hit. 

Easy Money Management

Business loans give transfer the amount to your account. You have to record each payment to keep track of the finances. You are more prone to overspending or bad investments with all the money available in the account. 

Credit cards are used for specific payments which give more control to the spender. Every transaction is reflected in the detailed account statement provided by the lender. Moreover, you can easily track the tax-deductible transactions from the list of expenses with credit card payment.         

Collateral-Free Borrowing

Credit cards are issued based on your earning and profit forecast. They don’t require collateral to provide the fund. Banks and other financial institution require collateral for business loans. However, there are private lenders in the market that offers bad credit loans without collateral.

Special Offers using Credit card 

As mentioned above, card payment on business-related transactions come with some special offers and discounts. You can save some serious money on travel and restaurant payments. Cost optimisation is an essential aspect for small businesses to survive.

Many banks offer business credit card users travel tickets, airport lounge access, and many more benefits. You will find zero-interest for the first 12 months as a promotional offer with many cards. Besides, you don’t have to use the card after the 12 months if the interest rates are high. 

Instant Access to Funds

The loan approval process may take a few hours to months based on the lenders. You cannot rely on them if you need immediate fund. On the other hand, you can use business credit cards to pay anytime you want.

You don’t have to wait for the bank to open if you need cash. However, the interest rate is relatively high for the cash withdrawal if the amount is not repaid the next month. Again, you can get instant, no credit check loans from some lenders at a lower interest rate.  

High-Interest Rates

Credit card debt comes with hefty interest rates at times. It creates unnecessary stress on the finance, courtesy of its instalments. Even a slight difference in the interest rates can cause a significant difference in the long term.

You should use the business loans to procure assets that may require payments for a long time. The overall cost, along with the monthly instalments, will be more manageable. It takes only a few hours to get approval when you apply for the loan online.

Negative Impact on Credit Ratings

A single missed payment will hurt your credit history. It can make you ineligible for business loans.

Missed payments on the loan will also put your credit history as a risk. However, the lender may offer repayment holiday during the troubling times for your business. You can make the payments next month if you cannot afford it because of some reasons. 

High Fees

There are many charges associated with a business credit card apart from the interest rates. You have to pay an annual fee, processing fee, and late fee if you use them regularly. All these charges may look insignificant alone but add up to a fair amount of money.

For loans, you have to pay the processing fee in the start only. There are no more charges if the payments are made on time. Which further reduce the overall cost associated with loan in comparison to the card debts. 

Personal Liability 

The credit card company may ask you for personal guarantee even for the business card. Collateral is different from personal guarantee as there is no guarantee what asset they will target. If the business fails, you are responsible for the card debt payment at any cost.

You might have a CCJ against in your credit history if they chose the legal route. It is a common practice to consider the owner and business two different entities in the business. Therefore, lenders may write off the loan as bad debt if they fail to make any profit. 


Credit card frauds are not rare in the present world where laptops and smartphones have your every detail. A small carelessness can cost you a profound loss because of fraudulent activity. You must keep the card details safe from fishy websites and stores. 

Even the employees can take advantage of the company card with needless, personal payments. There should be strict policies regarding the payment authorisation in the organisation. Also, keep track of the payments on the company-issued cards to the management. 

To Conclude

To sum up, cards are a requirement for the businesses to save money on some transactions and make urgent payments. However, it requires timely payments and expense tracking to avoid misuse of the funds. A loan is a cost-efficient alternative if you want a long-term liability. 


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