What are credit cards for small business?
By 2022, the Mercator Advisory Group reports that the volume of transactions completed with credit cards for small business is expected to grow to $686 billion from the $493 billion that was spent in 2017. Companies turn to credit cards for small business to help to separate business and personal expenses.
Credit cards for small business are used primarily for convenience rather than for financing. The amount that is owed on credit cards for small business is $50 billion, which is less than 8 percent of the total that is owed on credit cards in general. These are credit cards that are designed to meet the needs of small businesses and are not available to consumers.
How do small business credit cards work?
Like consumer credit cards, credit cards for small business are cards that have 16-digit card numbers and are linked to revolving lines of credit. These cards may have higher available credit limits, and some electronically populate expense reports when transactions are made with the cards.
However, many credit cards for small business do not have the same protections in place that consumer credit cards have. This means that when you use credit cards for small business, the terms might be changed at any time and your interest rate may be increased without warning, according to a report by the Pew Charitable Trust. Every time a charge is made with credit cards for small business, the cost adds to your overall debt. If you are unable to pay off the balance in full each month, you may also be hit with high rates of interest.
What is a small business debit card?
Another option for companies that want to move to cashless payments is a small business debit card. These cards may be co-branded with specific retailers or might be branded as one of the major card companies such as Visa, Discover, Mastercard, or American Express. When an employee uses a small business debit card to buy supplies for your company, the purchase price is subtracted from funds in your linked deposit account.
Using a small business debit card does not add to your overall debt. Since the money that is being spent is your own, you also will not be charged interest on your purchases. Some small business debit cards also offer added benefits such as the ability to restrict each card to certain expense categories or to certain vendors.
How is a small business debit card different from a small business credit card?
Business debit cards differ from credit cards for small business in several ways. You will not have to submit to a credit check to get a business debit card, but getting credit cards for small business will require both you and your business to undergo credit checks. Debit cards also do not charge high rates of interest or high annual fees.
Some business debit cards give you controls that credit cards for small business simply do not. With some cards, you can see how your money is being spent in real time and limit the specific purchases that your employees can complete as well as when they can use their cards.
Who traditionally uses small business credit cards?
Credit cards for small business traditionally were used by brick-and-mortar small companies such as boutiques, mechanics, flower shops, and others. Today, however, the gig economy has led to an increasing number of people making their foray into owning their own businesses on the side.
Some people who are creating businesses in the gig economy are now using credit cards for small business to help them to overcome cash flow problems and to help to separate their personal and business expenses. Other entrepreneurs use the cards to help them to grow their businesses and to build their business credit.
What are the benefits of using a small business credit card?
Small businesses use credit cards to obtain a variety of benefits. Business credit cards give small companies access to easy financing so that they can make it through lean times. Businesses that have credit cards can also use them to make purchases when they need to instead of waiting through approval processes.
Using business credit cards can also help businesses to avoid commingling personal and business expenses while making expense tracking much easier. Since the transactions are printed in the monthly bills, businesses can see where and how much they are spending across a variety of categories. Finally, using credit cards for small business can help to eliminate costly processes such as check writing, requisitions and approvals, and reimbursements.
What situations are best suited for a small business credit card?
Businesses should be judicious about how they use their credit cards. Since business credit cards carry high rates of interest, it is best to avoid using them to finance large capital expenses. Business credit cards are best used to make basic purchases instead of having to submit requisition forms and to wait for purchase approvals.
Credit cards should be used to eliminate the need to have employees spend their own money for their companies. When employees have to spend their own money to buy business-related items for their employers, they might become resentful if they have to wait to be reimbursed.
Why are more companies starting to use small business debit cards?
An increasing number of companies are starting to choose business debit cards for their payment needs instead of credit cards. Business debit cards can help businesses to use their own money to make payments and to buy supplies in a timely manner without having to add to their debt.
Some debit cards for businesses also have expense management and spending control features. Unlike credit cards for small businesses these features can allow businesses to control the spending that happens in their company in real time. This allows one to identify misuse quickly so that they can prevent losses caused by fraud.
The debit and credit card industry
The debit and credit card industry is booming as more companies and consumers are turning to cashless forms of payment. Wallet Hub reports that the number of debit cards in circulation in the U.S. increased from 434 million in 2007 to 680 million in 2016.
Among consumers, 82 percent of people reported that they have at least one credit card, and 81 percent reported that they used their credit cards at least once per month. For debit cards, 77 percent of consumers reported that they had debit cards, and 67 percent reported that they used their debit cards at least once each month.
Small business debit card benefits
Small business debit cards have increased in popularity because of the benefits that they offer. Unlike credit cards, some business debit cards give you the ability to turn individual cards off or on from your mobile device. You can turn the cards on or off according to specific times such as during your employees’ non-working hours.
These cards allow you to see how your company’s money is being spent in real time 24 hours per day. When you log into your dashboard, you can review what each employee has spent by clicking on his or her card. If you see problems, you can turn a card off by tapping a button on your smartphone. You can also choose the categories of purchases that are allowed on each card so that your employees will not be able to make unauthorized purchases.
Fraud case study
In an egregious case of fraud that caused financial harm to the United Way of the National Capital Area in the District of Columbia, the former chief executive officer entered a guilty plea to stealing $500,000 from the nonprofit organization. Oral Suer served as the CEO for 27 years until he retired in 2001. During that time, he paid himself $333,000 for annual leave that he did not take and a variety of personal expenses, including trips to Las Vegas and bowling equipment.
Suer’s longterm fraud from the United Way was discovered in 2002, well after he had already retired. Among the other types of fraud that he committed was paying himself $94,000 more than what his pension allowed. The scandal caused the United Way to suffer financial harm, including a $70 million drop in its fundraising. The case demonstrates that any employee, including trusted employees, can commit fraud against their employers.
How can using small business debit cards easily reduce your fraud risk?
Using the Bento for Business Visa debit cards can help to reduce your risk of fraud. These debit cards allow you to restrict the types of spending that each employee can make according to his or her job. For example, you might give your employee who regularly travels as a part of his or her job a card that allows him or her to pay for the travel expenses that you have authorized but not for anything else.
If you give your traveling employee a card that allows him or her to spend $1,200 for his or her airfare and rental car fees during a three-day weekend business trip, your employee will not be able to use the card to buy other items such as a visit to a golf course. You can also limit the card to only work during the trip itself so that it can’t be used when the business trip is over.
Where and how can I find a business debit card?
Much like searching for a credit card for small business finding a good business debit card requires a lot of research. It is a good idea for you to read reviews online on trusted third party sites such as Capterra. The Bento for Business Visa debit card has a perfect five out of five rating because of its robust expense controls and ease of use.
When you read reviews on a number of different sites and identify the card that you want, you can then go to the website of the company and apply for the card online. You should make certain to compare the different features and costs of the different cards that you consider before you make your decision.
Why Bento is the best solution for your business debit card needs
Bento for Business offers one of the top solutions for today’s small businesses. The substantial expense controls can help you to keep a tight rein on your expenses and to prevent fraud from occurring. You can order up to 10 cards for a monthly fee of $29, and there are larger packages available. There is a 60-day free trial so that you can take the time that you need to figure out if the cards are right for you. To learn more about Bento for Business Visa debit cards for small business, call us at 866.220.8455.