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How to Make Credit Cards Work for Your Small Business

Credit cards can be a critical tool for small businesses. They allow business owners to separate their company expenses from their personal purchases while offering valuable rewards and benefits. But like any tool that you have for your business, how you use your small business credit card really matters.

How Small Business Credit Cards Work

A small business credit card works nearly identically to the credit cards for consumers. Like a consumer credit card, a small business credit card requires the personal guarantee of the primary account holder, in this case, the small business owner. The card issuer will also report the account's balance and payment information to the major consumer credit bureaus.

How Small Business Credit Cards Differ from Personal Cards

While your small business credit card will work just like your personal credit card, it will also usually have features and benefits that are geared towards small business use. For example, small business credit cards tend to offer rewards for purchases that are commonly made by businesses, such as office supplies, advertising, and shipping purchases. For instance, the Chase Ink Business Cash card offers 5x points on up to $25,000 in combined purchases at office supply stores and on internet, cable and phone services each account anniversary year.

Also, most small business credit cards feature a number expense tracking and reporting tools that are designed for small business use. For instance, your small business credit card may offer monthly and quarterly reports to help track expenses and help you with your tax preparation. The Capital One Spark small business cards offer quarterly and year-end summaries that include itemized reports of your spending.

Other small business cards may offer alerts that you can configure to notify you when your employees spend a certain amount. A small business credit card may even allow you to limit your individual employee's spending. Also, most small business credit cards come with mobile apps that allow you and your employees to take pictures of receipts and categorize them. American Express small business credit and charge cards offer the Spend Manager℠ Mobile App that lets you easily add receipts and notes to your transactions, including photos.

Finally, some small business credit cards allow the primary account holder to designate someone to administer the account. For example, a business owner could have his or her financial manager designated.

Another thing that can potentially distinguish a small business credit card from a consumer card is the protections offered by the CARD Act of 2009. Credit cards that are marketed to small business users are exempt from several of the law's consumer protections, such as a ban on retroactive rate increases.

However, many small business credit card issuers have voluntarily chosen to have their small business cards comply with the regulations that affect consumer versions. See your card's terms and conditions for more information.

Best Ways to Use a Small Business Credit Card

Another key difference between small business credit cards and consumer credit cards are the best ways to use them. With a consumer card, the primary account holder will sometimes designate family members as authorized cardholders. But with a small business credit card, the primary account holder is typically the business owner, and any authorized cardholders are usually his or her employees.

And just as with a personal credit card, the primary account holder will be responsible for the repayment of all purchases made by employees who are authorized cardholders.

Extending your company's purchasing power to your employees has many benefits, but companies should also take steps to minimize the potential liability. Some tips for managing your small business credit card with employees include:

  • Companies should create written policies covering the use of company credit cards, stating which kinds of purchases are approved, and which are forbidden.
  • Companies may also choose to create a policy that requires written approval before using the card to make purchases beyond a certain amount.
  • To assist with monitoring these policies, you can enable your small business credit card's email or text alerts.
  • Your company's credit card usage policy can also specify the consequences for the unauthorized use of the company card including reprimands, loss of charging privileges, and even dismissal.
  • Your credit card usage policy should also hold employees responsible for repayment of personal charges to the company card. And to ensure that small business credit cards are only used for authorized company purchases, companies should set up a process to audit statements each month.

Companies should also be sure to take advantage of their small business credit card expense tracking and reporting features. Employees can be encouraged or required to capture and categorize their receipts, and the accounting department can be instructed to generate reports that track trends in spending.

By utilizing all of the features and benefits of your small business credit card, your company can receive the most-possible value from this powerful business tool.


Editorial Disclaimer: Opinions expressed here are author's alone, not those of any bank, credit card issuer or other company, and have not been reviewed, approved or otherwise endorsed by any of these entities. All information, including rates and fees, are accurate as of the date of publication.

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