Using a business credit card is a practical way to pay for expensive items like office supplies, machinery, or raw materials. However, business owners of all sizes—from sole proprietors to CEOs of large corporations—should be aware that business cards function differently from personal credit cards. Different cards may offer different liability insurance policies, eligibility requirements, and rewards programmes, and not all personal consumer protections apply to commercial entities. In this blog, we will understand everything about business credit cards, from the meaning of business credit cards to their features and benefits.
What is a Business Credit Card?
A business credit card is meant to be used for business purposes rather than for personal usage. Businesses of all sizes can obtain business credit cards, which can assist them in developing a credit profile to improve future borrowing terms. Having a business credit card can be a good way for small business owners to keep their business and personal expenses apart for bookkeeping and tax purposes.
A business credit card is a special type of card made for business owners that has special features made for businesses. Business cards frequently have higher credit limits, more lucrative rewards programmes, and tools to help you control spending. Even if your company has cyclical patterns (such as snow supplies that experience high demand only in winter), as a business owner you must continue to pay your fixed business expenses like rent and utilities. You could use your business credit card to make purchases to help you deal with these cash flow fluctuations.
Your business credit card could also give you quick access to cash in case of a business emergency.
How a Business Credit Card Works
Credit cards for businesses operate similarly to personal cards. You make purchases using your credit card, and at the end of each billing cycle, you get a statement that shows your total debt outstanding and the minimum payment required.
If you pay your monthly account in full, you will not be charged interest on your purchases. Interest will begin to build up on your balance if you decide to carry a balance. Business credit cards have variable interest rates, much like personal credit cards, your chances of obtaining a good one increase with your company’s creditworthiness.
Nonetheless, many business cards function as charge cards, requiring full payment each month. The biggest advantage of charge cards is that they often don’t have a set credit limit. Although charge cards are not the best choice for newer businesses with high startup costs that owners are looking to spread out over time or for those with unpredictable income, they can be ideal for established businesses with significant monthly expenses built into the budget due to the lack of a spending limit.
Features and Benefits of Best Business Credit Cards in India
A business credit card gives you access to a line of credit, just like a personal credit card. Cash flow in a business can be unpredictable, but you always need money to run your business. That’s when the line of credit on a business credit card will be helpful.
1. Higher credit limits
These cards are made for business needs and usually have a bigger credit limit than the average credit card for consumers.
2. Track business spending
Business cards let you keep your business spending separate from your personal spending, which makes it easier to keep track of your finances and file your taxes.
3. Extended interest-free periods
Issuers can give business owners longer periods of interest-free loans than the usual 21 days that come with a personal credit card. If your business card has this feature, you will have more time to pay off your balance and more freedom to invest in your business.
4. More rewards
The best business credit cards provide more and higher rewards. For example, if you travel often for your business, you could earn cash back and other rewards on your business travel and the travel of your employees who use your card.
5. Perks related to business
You can also get business-related perks, like access to accounting software and discounts on services for your business.
6. Attractive sign-up bonus
You can also get a better sign-up bonus for your business credit card. There are business cards with no annual fees, but the ones with big welcome bonuses usually have higher annual fees.
7. Employee cards
You can also add employees to your business credit card and permit them to do certain things, like make some purchases for the business. Additionally, you can look at everything they do and get rewards for what they buy. You could also set different credit limits for each person based on what they did.
8. Secure transactions
Business credit cards make it possible to make safe transactions. There’s no chance of losing cash and no need to carry it around. Credit cards make it easy to pay for business costs with just a swipe.
9. Online convenience
You can use the bank’s portal to manage your card online. This makes it easier and more convenient to see statements, pay bills, block cards, file disputes, and so on.
10. Credit card statements
Getting credit card statements every month saves a lot of time and makes it easier to keep track of expenses and do the math. It also helps with budgeting and planning for the future. Business owners don’t have to work hard to see where their money is going.
11. Multi-purpose expenses
Business credit cards can be used to pay for a variety of things, including travel, entertainment, utilities, repairs and maintenance, business operations, and more. Employers may also have the option of putting limits on how a credit card can be used. Cardholders may only be able to spend money on certain things.
12. Consolidated payments
Cardholders will be able to pay for all of their expenses at once, and they will also be able to pay for multiple cards with a single payment.
Business Credit Cards- Eligibility and Documents Required
Various business credit cards have different requirements for qualifying. However, there are some prerequisites that you must fulfil:
- Age Requirements: Applicants must be at least 21 years old and no older than 70.
- Nationality: Must be an Indian Resident
- Profession: Work as a self-employed professional, a business owner, or a partner in a partnership.
To verify the information on the application form, you must send a few papers. Business credit cards may be issued under the company’s name or the name of one of its members. Only one document from each category needs to be submitted, and the number of documents required will vary appropriately. The following financial records are acceptable for business credit cards:
- Identity and signature proof – a passport, a PAN card, a driver’s licence, a voter ID card, an Aadhaar card, and, in the case of government employees, an employee identity card.
- Address – a passport, a PAN card, a driver’s licence, a voter ID card, an Aadhaar card, or an employee identity card for government workers.
- Age proof – a voter identification card, a secondary school diploma (grade 10), a birth certificate, a passport, an Aadhaar card, a pension payment order, or a receipt for a LIC policy.
- Income proof for Salaried Individuals – the latest three months’ worth of pay stubs, a six-month bank statement for your salary account, or other documentation of your income
- Income proof for self-employed businesspeople and professionals – the most recent IT returns with an income computation and other verified financial records, as well as evidence of business continuity.
How to Apply for a Business Credit Card?
You can apply online or offline for a business credit card.
How to apply online for a Business Credit Card
1. Go to the desired bank’s official website and apply for a credit card by providing some basic information such as your name, email address, contact information, annual income, and address.
2. A representative of the relevant bank will call you and walk you through the procedure.
3. Your documents will also be collected at your door by a representative.
Finally, the bank will review the paperwork and issue the credit card if satisfied.
How to apply for a Business Credit Card offline
1. Visit the bank branch closest to you and inquire about your selected card type.
2. The agent will inform you of the cards available that meet your needs.
3. Fill out the application and attach supporting documentation, including identification, evidence of residency, proof of income, and passport-size photos.
Small Business Credit Cards
Small business credit cards help entrepreneurs and business owners get the money they need to run a business. They can be used, to purchase technology, furniture, and other items for offices. These cards cannot be used by people to pay for any form of non-business expense because they are not intended for personal use.
Features and advantages of Small Business Cards
- Compared to conventional credit cards, business credit cards have a higher credit limit.
- They make it easier for firms to cover last-minute charges.
- These cards give substantially higher cashback and benefits than standard cards.
- It is safer and more secure.
- These are incredibly convenient to use and may be used to make purchases online through net banking.
Cons of Business Credit Cards
Additionally, some significant drawbacks to business credit cards should be considered:
1. Personal guarantees
The lender may need a personal guarantee from the business owner or another individual because firms frequently fall short of the minimal standards needed for credit scoring or other analyses of their trustworthiness. A personal guarantee is a clause in a contract that makes the person who is applying for the card responsible for all fees and regular payments.
Borrowers must study and comprehend the provisions of the agreement in its entirety because many business credit card agreements have a personal guarantee provision regardless of the business’s creditworthiness. If the lender applies the personal guarantee standards for recovery, any late payments on the card could be noted on the person’s credit report and result in a reduction in their credit score.
2. Less consumer protection
While Congress has strengthened consumer credit card safeguards, most notably through the Credit Card Accountability, Responsibility, and Disclosure Act of 2009 (CARD Act), it has largely exempted business credit cards from the new regulations. Because of this, it’s possible that the consumer safeguards that many people take for granted with their personal credit cards—like the prohibition on interest rate increases on outstanding balances—do not apply to their business cards.
However, applicants shouldn’t assume this unless it is specifically stated in the card agreement. Some card issuers have voluntarily extended some of those safeguards to their corporate credit cards.
Although possessing a company credit card and a personal credit card share many similarities, there are also significant differences that every business owner should be aware of. Business credit cards are typically better for your company than personal credit cards because they are designed to meet the demands of businesses. They will help you with your bookkeeping and tax filing, and their credit lines are often larger. It can make your business operations run more smoothly and give benefits that are suitable for your company’s requirements if you take the time to choose a card that fits your type of business.
The fact that the CARD Act, which applies to consumer credit cards and is aimed at protecting customers, does not apply to them is a significant drawback. Make sensible card selections that will provide you with a range of benefits and rewards that are advantageous to your organisation. Don’t overspend on a business card either, as you would with any personal card, as you could be held personally responsible for any debts.
1. What distinguishes personal credit cards from Business Credit Cards?
Ans: Personal and business credit cards function very similarly in many aspects. Both can provide sign-up bonuses, rewards points, and bonus points, but there are some variances in how they are handled by regulatory bodies. For personal cards versus business cards, there may be various terms and conditions. Additionally, business credit cards are made to meet a company’s needs and also give free access to several products used in the workplace.
2. Is it challenging to obtain a Business Credit Card?
Ans: Without personal credit, it is typically impossible to obtain an unsecured company credit card. Most issuers would need outstanding or decent credit. However, if you have no credit history, you might need to start with a personal card to establish credit before applying for a business credit card.
3. What is the turnaround time for a Business Credit Card?
Ans: After getting authorised, it takes between 7–10 business days to receive a new credit card. This means that after completing an application, it typically takes 14 to 24 business days to receive a credit card. However, if you are approved right away, the wait time will be less.
4. Who is eligible for a Business Credit Card?
Ans: You do not need to be operating a corporation, but you must be able to list a business, even if it consists of only one person.
5. Do Business Credit Cards check a person’s credit?
Ans: The card issuer may take into account both the track record of your company and your personal credit when you apply for a business credit card. This can entail performing a hard credit check on your own credit, which might result in a slight decline in your credit scores.