Wondering how business credit cards work and how they can enhance your enterprise’s operations? If your answer is yes, you are in the right place. Tracking and managing your venture’s expenses may get messy as your business grows.
In particular, you can lower your business’s expenses (travel cost, for example) with business credit card rewards and meet unplanned financial obligations you don’t have enough money to finance with a business credit card.
If you’re hellbent on getting a business credit card for your business, read this article till the end to find out everything about business credit cards.
To know how business credit cards work:
- Understand How Business Credit Cards Work
- Understand How Business Credit Card Issuers Work
- Understand How Business Credit Card Rewards Work
- Understand How Business Credit Card Offers Work
- Understand How Business Credit Card Eligibility Works
- Understand How Business Credit Card Application Works
Pro Tips
- Learn How to Select a Suitable Business Credit Card
- Learn What to Do if Your Business Credit Card Application Gets Denied
- Learn How to Build Business Credit Through Business Credit Cards
Excited to learn more? Read on.
1. Understand How Business Credit Cards Work
Business credit cards work similarly to personal credit cards—except that on business credit cards, you access higher credit limits and enjoy perk reward programs. You charge all business-related costs to your business credit card and receive a statement of your spendings after your billing cycle.
To make accounting easier, you can download your business credit card expenditure information and import it to your accounting software. In this way, you can easily check, at the end of your billing cycle, the minimum amount due or any outstanding payments your business incurs.
The interest you pay on each purchase depends on your billing cycle. You pay zero interest on all purchases if you clear your bill each month. And the cool thing is that you don’t need an employer identification number (EIN) to apply for a business credit card. Once you understand your business needs, then you can decide which business credit card is best for your venture.
>>>MORE: What Is a Corporate Credit Card
2. Understand How Business Credit Card Issuers Work
To know how business credit cards work, understand how the card issuers operate. Credit unions and banks are business credit card issuers. As you use your business credit card, you’re indirectly borrowing from the card issuer and the money moves from your issuer, through the network (MasterCard, Visa, Discover, or American Express) to your merchant’s bank.
Business credit card issuers make money through interest, fees, and interchange revenue. If you pay you balance in full every month, you avoid incurring any interest. Late, annual, balance transfer and cash advance fees are few examples of major fees where business credit card issuers generate money from. Subprime issuers who focus on businesses with bad credit score charge more on fees than they do on interest.
Business credit card issuers also make money through interchange. Here, when you make a transaction with your business credit card, the merchant pays 1% to 3% of the transaction to your card issuer.
3. Understand How Business Credit Card Rewards Work
To grasp how business credit card works, understand how credit card rewards work for enterprises. Each time you make a transaction with your business credit card, you earn a reward— usually in the form of miles, points, or cash back.
Thanks to rewards, you can save more money by reducing your account balance, clearing your travel expenses, or acquiring discounts with some merchants. You can pile up your rewards or use them to settle travel or other business-related purchases.
4. Understand How Business Credit Card Offers Work
To master how business credit cards work, understand how credit card offers work for businesses of all sizes. As a business owner, you know that a single dollar you spend matters. To maximize your enterprise’s transactions, getting a business credit card is a good idea. There are different types of business credit cards and they offer you carrying benefits depending on your venture’s need.
Also, getting a business credit card is a good way of rebuilding or building your business’s credit score. Before you decide which business credit card to choose, explore different offers at your reach, looking out for their interest rates, fees, credit limit, etc.
5. Understand How Business Credit Card Eligibility Works
To understand how business credit cards work, familiarize yourself with the eligibility requirements, which start by having a business your operate. Also, you may need robust personal and business credit scores in order to boost your chances of getting a business credit card.
With your credit score, a bank or other card issuer can easily determine the type of business credit card you qualify for. Understand that your business size—medium-sized or startup with no employee—doesn’t qualify or exempt you from getting a business credit card for your enterprise. However, if you’re ever going to get a business credit card quickly, your business must generate consistent profits with bank statement proves.
If you’re a freelancer, sole proprietor, large or small business owner, you’re eligible to apply for a business credit card. Also, corporations and limited liability companies also qualify for business credit cards.
6. Understand How Business Credit Card Application Works
To verify how business credit cards work, understand the application process. To commence a business credit card application process, provide the proof of your business’s operational longevity and existence in addition to your personal information. Provide additional information such as business’s name, number of workers, business structure, type of business, annual income, business address, and more to apply.
Research different business credit card issuers before you choose one that works best for you and submit your application. Visit your bank and check the conditions it requires for business credit card application. Consider bank alternatives if your bank’s offer doesn’t meet your business needs.
Prioritize factors such as annual fees, credit limits, sign-up benefits, interest rate, and rewards in choosing a business credit card issuer. Know how the card you apply for works and read through the card’s terms and conditions before you finally submit your application.
Learn How to Select a Suitable Business Credit Card
To understand how business credit cards work, learn how to select the right one for your enterprise by checking the rewards and benefits on your transactions, incentive on sign-up, annual fees and other charges, and issuer’s customer support.
Compare different business credit card options and choose the one that meets your venture’s needs the most.
>>>GET SMARTER: How Business Credit Cards Work
Learn What to Do if Your Business Credit Card Application Gets Denied
To master how business credit cards work, learn what to do if your application for a business credit card gets denied. First of all, find out while the card issuer declined your application. Perhaps, it’s because of several card applications, negative reports on your credit history, empty credit history, etc.
Build your credit score if you have bad personal or business credit score. You can request a copy of your report from any of the credit bureaus in order to check your personal and business credit scores.
Alternatively, you can meet your card issuer representative in person and request if the company can reconsider your application. Or apply for a secured business credit card—especially if you have assets that measure up to the credit limit your require.
Learn How to Build Business Credit Through Business Credit Cards
To grasp how business credit cards work, master how to build business credit through them. Business credit cards report your activities on the card to credit bureaus, a great way of building your enterprise’s credit.
Use your business credit card for all business-related purchases to access rewards such as cash back, points, and miles. To build your business credit, clear your business’s credit card account balance in full each month to build and keep your business credit card utilization rate below 30%.
Recap
To fully understand how business credit cards work, understand they cards work and know how business credit card issuers work. Learn how business credit card rewards work and how business credit card offers work.
Understand how business credit card eligibility and application works, learn how to select a suitable business credit card and know what to do if your business credit card application gets denied. Last, learn how to build business credit through business credit cards.
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