Would corporate business credit cards work for me?

Corporate business credit cards are widely used by large and small businesses across the United States. Banks and financial institutions that sponsor these company cards offer a variety of matching business services that individual cardholders don’t usually receive.

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The main difference in business cards is accountability. As business credit cardholders charge goods and services, the card company segregates the charges by expense category, following the standard IRS guidelines required of businesses. Not only does this come in handy at tax time, the card issuer will now have permanent, accurate records of these expenses, also a tax requirement. IRS Publication 535 can provide more information on business expenses.

What are some of the other benefits of corporate credit cards?

Organizing companies’ total business expenses is important and corporate cards do this job well! They also allow a company to go even further, tracking the expenses of individual employees. Each employee who is issued a company card is tracked and can be monitored as he or she goes about the company’s business.

In the past, employees were required to fill out weekly expense reports, providing receipts or other proof of their expenditures. Many expenses were paid in cash, for example, small restaurant tabs or incidental expenses, and receipts were often forgotten or not requested.

Of course, employees were expected to be honest about these transactions, but padding an expense account was common practice for outside sales people and company executives alike. Corporate credit cards hold employees accountable.

As credit cards have become accepted most everywhere, for every kind of expense, employees can be mandated to use the company card for all business related purchases. Monthly statements show usage by employee, so budgets can be maintained and wasteful spending or other abuses can be curbed. Card usage is a privilege and can motivate employees to stay on track.

Are interest rates better on corporate cards?

Yes! Based on national averages, the interest rates charged on corporate credit cards tend to be one or two percent lower than rates charged for individual cards issued by the same institutions. Essentially the banks are giving a volume discount to their corporate cardholders.

What about credit rewards programs?

Yes, corporate cards may be eligible for bonuses, points and rewards, just like their individual counterparts, but beware. These gifts don’t come free. Statistics show that interest rates for so-called reward accounts can be as much as two percent higher than non-reward cards.

What are credit card interest rates currently?

Surveys show that interest rates have been steady in recent months, the average consumer rate holding at about 14.9%, while the average business rate is 14.1%. Both rate quotes are for non-rewards cards. The higher reward card averages are 16.8% and 15.8% respectively.

Are credit cards just for employees?

Certainly not! With business bank loans and lines of credit, both more expensive and more difficult to obtain, more companies have turned to using unsecured corporate credit cards to extend their short-term credit. With corporate credit cards, companies can maintain their inventories, and purchase raw materials and other supplies for manufacturing purposes.

Credit card financing works best in short-term situations, ideally when the charges are to be paid in full within the 25 or 30-day grace period allowed by the majority of card issuers. Because of high interest rates, companies do not want to carry large balances on their company cards, often paying outstanding balances each month.

How can my company escape interest charges altogether?

The alternative to a typical 14 or 15% corporate credit account would be a prepaid credit card. These cards are secured in advance by cash payments to the credit card issuer. The amount of credit extended is equal to the advance payments. Since the bank is lending out your own capital, interest charges are avoided.

Another option is a secured type of credit card which is directly links to funds you deposit. Secured credit cards feature low fees, and in some cases no fees, for premium clients, plus all of the other benefits mentioned above.

How can I get the best deal?

As in any other credit transaction, the best rates are available to the companies with the highest credit ratings. However, even for new businesses or for businesses with lower credit scores, deals exist for company credit cards. In both instances, secured prepaid cards would be one way to manage expenses and establish a positive credit record. Make sure to check out the companies you are considering by contacting your local Better Business Bureau.

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