Business credit cards: 5 smart steps to find the perfect one for your company

Opting for the correct business credit card can help immensely in boosting cash flows, strengthening the company’s financial discipline and organising expenses. With lending institutions continuously upgrading their technology-driven product features and services.

Here are simple yet effective steps to help upcoming entrepreneurs make informed business credit card decisions:

1. Identify your business spending pattern

Acknowledge and understand where your funds are going every month. This means understanding the foundational pattern of spending. This is the fundamental of selecting the most appropriate credit card for yourself. Some basic questions aspiring credit card applicants should ask themselves are:

1. Do you spend more on utilities, travel and digital advertising?
2. Are fuel costs a significant part of your monthly expenses?
3. How significant are vendor payments for your firm?

Understanding and mapping these distinct categories according to monthly expenses can help you in shortlisting credit cards that reward your primary expenses. Holistically, such an approach can also help boost your credit score.

2. Compare fees, rewards and cashback

Prominent credit card issuing institutions such as HDFC Bank, ICICI Bank, SBI, etc., offer customers a mix of cashback, rewards and travel-oriented business credit cards. That is why to make the best possible choice, you should.

1. Evaluate tangible benefits in comparison with the real annual fee.
2. Check out bonus categories that match your spending patterns.
3. If the business credit card you are opting for offers higher value, then a higher fee is fair.
4. In case the credit card is unable to offer lucrative services, then it must be reconsidered.
5. In case of doubts, you should have a discussion with the certified customer support executive of your credit card company.

3. Check credit limits and flexibility

A strong credit limit is crucial for small and medium-sized enterprises that face fluctuating and erratic monthly expense requirements. To combat such a situation, you should:

1. Go ahead with business credit cards that permit a limit boost based on financial performance.
2. Have features such as interest-free credit card periods, these periods are generally between 20 to 50 days, and they can support short-term cash flow management.
3. Draft a spending plan that aligns with your company's objectives and long-term financial targets. Business credit cards should be applied for only in accordance with the same.

4. Assess expense management tools

When aiming to run a flourishing modern business, efficiency is crucial. For the same you should aim to use expense management tools that provide services such as:

1. Real-time spending dashboards.
2. Add-on credit card services for employees, along with distinct card offers and adjustable limits.
3. GST-compliant and updated statements to assist with tax filing.

Such tools and services reduce the total manual work and support proper management of company finances. It also assists with healthy employee relationship building.

5. Review protection, insurance and partner benefits

From travel insurance to fraud protection and deals on accounting software, value-added benefits can make a noticeable difference. Insurance documentation should be recent and updated to protect the overall financial health of the company.

1. Look for partnerships with fuel networks, airlines, fintechs and co-working spaces.
2. Ensure the card provides robust safety features, especially for digital payments.

Top business credit cards

Source: Paisabazaar

Note: The above credit cards, annual fees and features are for illustrative purposes only. For more details, please refer to the official website of the respective credit card-issuing financial institution.

Risks of using business credit cards

A well-chosen business credit card is more than a payment tool. It is a financial instrument that supports growth, control and efficiency. Still, it is critical to keep in mind that business credit cards come with several inherent risks. Some of these risks are discussed briefly below:

1. High interest rates: Many business credit cards come with very high interest rates. This can make the management of such credit cards difficult.
2. Impact on personal credit: Some business credit cards require borrowers to provide a personal guarantee. In such cases, if the business fails, the owner's personal credit may be negatively impacted.
3. Overspending and mismanagement: The easy availability of credit can fuel reckless spending by businesses that exceeds their means. Such practices must be curbed by business credit card holders.
4. Fees and hidden costs: Late fee, annual charges, foreign transaction fee, and overlimit charges can add up and make the entire credit card usage difficult to manage for the main business holder.
5. Fraud and liability risk: Data theft and unauthorised credit card usage by employees or theft can result in serious financial losses and long-term legal trouble for the fundamental business.

In conclusion, by following these steps and understanding the associated risks of business credit cards, entrepreneurs in the country running new-age and upcoming businesses can select a card that aligns with both their present needs and future ambitions.

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Disclaimer: Mint has a tie-up with fintechs for providing credit; you will need to share your information if you apply. These tie-ups do not influence our editorial content. This article only intends to educate and spread awareness about credit needs like loans, credit cards, and credit scores. Mint does not promote or encourage taking credit, as it comes with risks such as high interest rates and hidden charges. We advise investors to discuss with certified experts before taking any credit.