For small businesses today, being in business often requires businesses to accept and to use credit and debit cards. The payment landscape is changing as cards are threatening an end to checks and cash.
In 1995, for example, checks were used for nearly 60 percent of purchases. In 2016, checks only accounted for 10 percent of purchases, cash accounted for 20 percent, and credit and debit cards accounted for 70 percent of purchases.
Business cards are credit cards and debit cards that have features that are specifically designed to meet business needs. However, it can be difficult for newer small businesses to get approved for credit cards. The statistics and trends on small business cards are illuminative.
The Small Business Administration reports that 27 percent of small businesses were denied credit. Among small business owners, 46 percent reported that they used their personal credit cards for business needs, intermingling their personal and business funds. This can expose business owners to tax issues and potential liability problems.
Small business credit card
Small business credit cards are designed to handle the specific needs of businesses in several ways. Small business credit cards work in a similar manner to consumer credit cards. However, there are advantages of business credit cards, including additional features. A credit card for small business might include expense controls and tracking features and the following types of business rewards:
- Rewards for common types of business purchases such as advertising and office supplies
- Extra cards for workers
- Gas rebates
- Extra travel miles and points
In 2018, small business credit cards were expected to account for $500 billion in purchases. In order to gain approval for these cards, business owners must do the following:
- Figure out total annual revenues
- Identify appropriate card offers
- Decide between a credit card for small business or a debit card for business
- Submit applications
- Undergo business and personal credit checks if credit cards are chosen
- Sign personal guarantees of the debt for credit cards
There are several disadvantages of credit cards that business owners should be mindful of. While these cards might offer no-interest introductory rates, the interest rates once the introductory periods are over are often high regardless of your credit score.
Purchases made with credit cards add to your company’s level of debt, and if they are not repaid during the same month of purchase, the purchases will accrue interest charges. Finally, business cards are not subject to the Card Act, so they do not offer the same protections that consumers enjoy.
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- How and why to get a credit card for business
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- Company credit cards vs. business debit cards
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New business credit card
To get a new small business credit card, business owners must credit qualify. Card issuers will check both the business’s credit as well as that of the business owner. If the business has not been open for very long, or if there are marks on the owner’s credit, the application may be denied.
New businesses that have been operating for less than five years may have trouble qualifying for a new credit card. A startup business credit card may offer multiple benefits, including the following:
- Increased spending power
- Help to build business credit
- Can help to separate your finances
- May offer rewards and perks
Companies may search for a credit card for new business for several reasons. A credit card can offer easy financing to help businesses when they face cash shortfalls. However, business owners should be aware that credit cards may add to their debt. If the business is unable to repay its credit card debts, companies may go after the owners’ personal assets if they have signed personal guarantees.
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Small business debit cards
A small business debit card is a card that is linked to a business’s debit account. These cards often offer card controls and features to manage your business’s expenses. Debit cards may allow businesses to avoid adding to their debt while also helping them to gain control of their expenses.
Debit cards do not require credit applications because businesses spend their own money when they use the cards rather than adding expenses to revolving credit lines. Debit cards for business have several advantages and disadvantages that you should be aware of.
Some of the advantages of small business debit card include the following:
- Applications won’t impact your credit
- Card controls allow you to set daily spending limits and to restrict purchases to certain merchants
- Purchases won’t add to your debt
- Employees can purchase items for your company when the purchases are needed
- You can view your company’s expenses in real time on your online dashboard
Debit cards for business also have some disadvantages. The disadvantages of small business debit cards include the following:
- Can’t help businesses with cash shortfalls
- May not offer the types of rewards as credit cards
The right debit cards are protected. The business’s linked deposit account should be insured by the FDIC for up to $250,000. Good debit cards also use highly secure SSL-encryption technology for an added layer of protection. If a card is used to make unauthorized purchases, or if a thief steals the card number, most banks will replace what was lost up to $250,000 other than the first $50.
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Business credit cards vs. business debit cards
Businesses should be aware of the differences between credit and debit cards for small businesses. Both types of cards have their own advantages and disadvantages. When you compare business credit cards to business debit cards, one key difference emerges.
When you consider business credit cards vs. business debit cards, credit cards require that your credit is checked when you apply. Debit cards do not require that your credit qualifies, and your score will not be impacted.
When you compare credit cards to debit cards, you should understand that credit card purchases are added to the revolving line of credit that the company issued to you. While the cards can help your business when times are lean, they can also cause your company to go into debt. Debit cards do not add to your company’s debt and may offer some added protections that credit cards do not offer with their spending control features.
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Small business prepaid card
A prepaid card is similar to a debit card, but there a few important differences. Prepaid credit cards may be called credit cards, but they do not extend revolving credit lines to the purchasers. Instead, these cards are not linked to credit lines or to bank accounts but have money loaded onto them directly.
Prepaid credit cards have spending limits that are established by the amount of money that is loaded onto them. Businesses may give prepaid business credit cards to specific employees so that they can purchase specific items for the companies.
Unlike debit cards, prepaid business credit cards are not linked to a business’s debit account. Prepaid cards for business may be associated with a particular merchant to be used for purchases only with that merchant. Other prepaid cards may be able to be used anywhere that accepts credit and debit card payments.
Debit cards may offer greater controls and protection for businesses. When you give an employee a prepaid card, he or she may spend up to the amount of money that you place on it without restriction. By contrast, debit cards may be restricted by the times that they can be used, where they can be used, and the types of purchases that can be made with them.
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Small business prepaid debit card
Small business prepaid debit cards are linked to a business’s debit account. However, the business is able to choose how much money to place on each card from the account. Employees who are given prepaid debit cards will not be able to use them to access the underlying accounts.
Prepaid debit cards cannot be used at ATMs to make cash withdrawals from the business’s account. Prepaid business debit cards may also come with robust card controls that can allow businesses to restrict the cards to specific merchants, times, and loations.
Prepaid business debit cards offer an easy way for small businesses to exercise tight controls over their business expenses. They can choose when the cards will work and restrict them to workdays only or even to specific hours. Some businesses choose to activate prepaid debit cards for business to make specific purchases and then to immediately turn them off once the purchases are completed.
Prepaid debit cards for business may be offered by banks and other private card issuers. To get these cards, businesses should first research the different offers to determine which ones offer the best features. The businesses can then simply apply for the cards and choose the number of cards that they want.
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Small business prepaid credit card
Credit cards that are prepaid are different than debit cards. These types of credit cards may be gift cards that consumers purchase from specific merchants in certain dollar amounts, or they may be Visas or Mastercards that can be purchased and used anywhere.
When someone buys prepaid cards, the card limits are whatever amounts that were originally placed on the cards. There are also prepaid cards that businesses might get from banks or card issuers to help with employee expenses.
Some prepaid cards are secured credit cards. With these types of cards, the banks might agree to approve businesses that have problematic or no credit histories for low dollar amounts. The limits on these cards may be initially low, and the businesses may be required to secure the limits by depositing the required amounts.
For example, secured prepaid cards for business that have a $2,000 limit will require the businesses to deposit $2,000 to secure the cards. That amount will then serve as the business’s limit. The business will then need to make monthly payments on the purchases that are made. Interest may be charged, and the credit limit may be gradually increased. Bento for Business does not offer prepaid credit cards and instead offers debit cards that are designed for businesses.
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Small business reloadable cards
Reloadable credit cards and refillable credit cards are more properly referred to as types of reloadable debit cards. These cards are not credit cards because you are not extended a credit line. Instead, you choose how much money to fund reloadable credit cards or refillable credit cards with when you first purchase them.
When the balances on your reloadable credit cards run low, you can load more money onto the cards. These cards are often general purpose cards that are branded as Visas, Mastercards, or American Express and can be used anywhere that accepts those major types of cards.
When businesses give reloadable cards to their employees, the spending limits that the employees will have can be restricted according to how much money the businesses have chosen to place on the cards. Some reloadable debit cards allow businesses to set daily or weekly spending limits and to turn the cards off or on remotely whenever they want.
When businesses are evaluating reloadable cards, they should opt for cards that come with strong card controls. When cards have these types of features, they can help businesses to prevent losses from waste, fraud, and abuse.
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Small business fuel and gas cards
Small business fuel cards are gas debit or gas credit cards that businesses can give to their employees to make fuel purchases while they are traveling. Some small business fuel cards are co-branded with specific gas station chains while other fuel credit cards may be used to purchase fuel at any gas station.
The small business gas cards and gas credit cards market is expected to grow to $11,734.2 million by 2022. Company fuel cards can either be fuel credit cards or gas debit cards.
Credit cards for gas purchases have some drawbacks. While they might offer rewards such as discounts on fuel purchases, the interest that the cards charge may quickly negate the benefit of the discounts. Credit cards may also be used to purchase other items inside of the stores.
Debit cards will not add to debt or incur interest charges, and some can be restricted to fuel-only purchases at the pump. Fuel cards can help businesses to enjoy better spending transparency and to get rid of costly reimbursement processes for fuel expenses.
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- How to choose the best fuel card for small business
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Small business fleet fuel card
A small business fleet fuel card is designed for companies that own several business vehicles. Small business fleet cards can be issued to the employees whose jobs involve driving the fleet vehicles. The employees can then use the cards to make gasoline purchases while they are traveling.
A fuel card for fleet management can help companies to keep control of their fuel costs. Fuel cards can be restricted to fuel-only purchases, and the business can review the purchase history of each driver to view how he or she is using the card.
Debit cards are better choices than credit cards for fleet management. They do not add debt to the company’s credit line and will not incur interest. Debit cards also allow businesses and fleet managers to view expenditures in real time.
If they see that a particular driver is spending much more on fuel than he or she should, they can turn the card off instantly and address the problem. Fleet managers can also set fuel spending limits by the day and turn the cards off when the employees are off from work.
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- The benefits of fleet cards for small business fleet management
- Small fleet fuel cards – The smarter way businesses manage small fleet fuel expenses
Small business fraud
Many small business owners implicitly trust the employees that they hire and may have workers who stay with them for years. Unfortunately, small business fraud is a very real problem for businesses. It is important for businesses to adopt small business fraud solutions.
Businesses need to take steps to prevent fraud and to control employee spending. Businesses can start by checking their risk of fraud with our free fraud calculator. Using a calculator can help you to identify your areas of risk so that you can take steps to eliminate fraud.
To stop fraud in your business, there are several things that you can do, including the following:
- Adopt and implement an expense policy
- Train your employees on your policy and on how to identify fraud
- Avoid giving too much control to a single employee
- Get rid of petty cash, reimbursements, and checks
- Automate your AP processes
- Use debit cards with extensive controls and expense management features
- 5 Fraud prevention strategies for small businesses on a budget
- Use our free expense calculator to reduce fraud
Bento for Business offers the Bento business Visa cards with expansive controls and restrictions available to businesses. The business Visa cards have built-in controls, allowing you to determine when your employees can use the cards and how much they can spend.
Businesses can track employee expenses and control spending with their business cards, making business expense management simpler. You can use the cards to track business purchases by the employee or by the department. The spending data is uploaded automatically to your existing software, and you can view transaction-level data for each of your business debit cards in real time whenever you want.
- A business Visa card can save your business both time and money
- The best way to manage your employee expenses
Find a business expense management solution
Bento for Business is the brainchild of several finance industry professionals who wanted to offer an expense management solution to businesses. The company’s debit cards are created specifically with the needs of businesses in mind, and the control features allow you to keep your expenses under control.
Bento has received hundreds of positive reviews from its customers and has been profiled in national publications. It is one of the most highly ranked provider in the industry and has thousands of customers. You can order up to 10 cards for a low monthly fee of $29 and will not be charged interest since the cards are not credit cards.
If you would like to see how the would work for your business, you can request a demo. Bento also offers you the ability to try the cards for free for 60 days. To learn more about getting small business debit cards instead of a business credit card, call 866.220.8455.