How to Apply for a Small Business Credit Card

How to Apply for a Small Business Credit Card

Wanted to start a new business but are worried about loans, availability of cash in hand, multiple bank visits, lots of paperwork, etc., a small business credit card has got your back. 

Small business credit cards offer business owners easy access to revolving lines of credit with set credit limits for making purchases and cash withdrawals. 

Like consumer credit cards, business credit cards accrue interest each billing cycle if the balance is not paid in full.

A business credit card is a convenient way to quickly fund short-term needs and increase your business's purchasing power. 

They are often marketed as an attractive alternative to traditional lines of credit. 

Like any other funding source, business credit cards are costly and must be managed carefully. 

It's a convenient way to increase the purchasing power of your business. You can avail of your business credit card by either applying it online or by visiting your nearest bank branch. 

A further article will get you to cover all the takeaways you need to know before getting a card to make your business reach heights because the sky is the limit.

How does a credit card work?

With a good system, tracking and controlling credit card spending can become easier and ultimately impact your bottom line. Certain strategies can be used to ensure good credit card practices.

  • Lock it down: 

Most major card issuers implement "card blocking" or "freezing". This allows you to turn the card on or off via the issuer's website or app. For example, use a lock to prevent fraud if you misplace your card. However, spigots can be turned on or off for other reasons. To suppress impulse output or block authorized users. You can also easily block cards you rarely use in case your numbers are compromised. Note that some uses of this feature need to be improved with American Express. Card blocks expire in one week.

  • Use Autopay every day:

You may be reluctant to close your account if you have an infrequently used credit card with an annual fee. This can reduce the average shelf life of your balances and impact your total balance. Both of these are factors of creditworthiness. Issuers with many card options allow you to switch to a fee-free card to help you maintain your line of credit and credit history. This saves you annual fees without jeopardizing your credit.

  • Optimize the grace period:

If you always pay off your credit card balance in full but have large purchases that take weeks to pay off, consider when to maximize your grace period. Please purchase after the billing period has expired. Then there is a grace period of about a month before the next bill is due, plus another grace period (at least 21 days by law). All in all, it could be his 7+ weeks of interest-free loans.

 Note: The grace period does not apply to caching.

  • Request a Downgrade:

You may be reluctant to close your account if you have an infrequently used credit card with an annual fee. This can reduce the average shelf life of your balances and impact your total balance. Both of these are factors of creditworthiness. Issuers with many card options allow you to switch to a fee-free card to help you maintain your credit line and credit history. This saves you annual fees without jeopardizing your credit.

  • Play the gift card shuffle:

Credit card benefits for certain types of expenses are usually based on where the purchase was made, not what was purchased. So, for example, if your credit card rewards are high for shopping at a supermarket, you can buy gift cards for restaurants, retailers, and hardware stores down the aisle. Exceptions may apply. For example, supermarkets may not allow gift cards to be purchased with a credit card.

Who can get a card?

In India, there is some eligibility to get a credit card from the bank, which they keep to avoid scams and frauds by many people. 

Applicants must be at least 18 years old.

Minimum income must be between Rs.1 lakh and Rs.3 lakh.

Applicants must be either employed or self-employed.

Also, many businesses, believing that important officials and travellers needed the convenience of corporate credit cards, issued cards to too many people and lost control over their credit card spending, which has also created severe problems. 

However, it helps to have clear rules about who gets the card, whether based on seniority, position, or other factors. It can reduce the stigma of unqualified employees.

Setting Credit Card Limit:

All businesses should have clear spending guidelines, including what expenses can be charged to the card, how much employees can spend, and how often the card can be used. 

It is important that the policy is in writing and read and signed by all employees to whom cards are issued. Then give each cardholder a copy for reference.

Depending on your business card, you can set restrictions that restrict transactions to certain amounts, expense categories, and even certain dates and times. 

Some cards allow you to set individual limits for each employee. For example, you can limit one employee's gas purchases to $50 per day and another employee's gas purchases to $100 per day and $50 for meals, but only on weekdays.

Being watchful of card activity and using the card wisely:

Many business credit cards let you set up activity notifications that you receive as text or email messages. 

Alerts can be set to notify you every time a transaction occurs or only when an employee uses (or attempts to use) a card fraudulently. 

You can also view your latest account activity using Online Banking and Mobile Banking. 

The accounting department must review each statement to ensure that each item is an approved claim. 

Knowing when a business should use credit is important. This is only sometimes the best choice. 

Especially if it's a large expense that can't be paid in full before interest accrues, it takes extra effort to obtain a loan from a bank or other lending institution. 

Still, it often makes economic sense because credit card interest rates are typically much higher than such safer debt instruments. It is fulfilled.

Also, a large purchase, or a few large expenses, can overload your credit card and leave you with no funding source at all.

Ensuring Accountability:

To ensure the accountability of the credit card holders by the card issuers, certain rules and regulations are formed.

These rules aim to eliminate or reduce certain credit card fees, minimize manipulation for younger customers, and allow full disclosure of fees for all users. To all future balances in the wake of late payment. 

The law limits this practice to cardholders at an early stage, requiring advance warning of rate increases.

The act limits fees and expiration date on gift cards and non-reloadable prepaid cards. 

The law also prohibits credit card companies from charging customers over their account limits. 

Customers can now choose whether to "opt-in" to overage charges on their credit card accounts. 

If you decline registration, your card will be rejected if your balance exceeds the limit due to proposed charges or withdrawals.

The law requires bank statements to be mailed or posted online no later than three weeks before the due date and that the due date remains constant (unless the cardholder changes it). Therefore, no chance of fraud.

Merits of getting a business credit card:

In addition to providing the cash flow you need to sustain and grow your business, credit cards offer the following benefits:  

  • Convenience:

Credit cards are the ultimate funding convenience. Business owners can access funds for purchases and cash withdrawals much faster and easier than finding cash or using a chequebook.

  • Bookkeeping Assistant:

 In addition to receiving a monthly statement, most cards offer small business cardholders online tracking tools to manage their accounts, such as a year-end statement that helps accountants track, categorize, and manage expenses. Provided to those It simplifies bookkeeping, uses outside experts to direct audits, helps pay taxes, and provides an easy way to monitor employee spending.

  • Online Ease:

Business owners are increasingly shopping online and transacting with vendors, contractors, and suppliers. Using a credit card makes online transactions easier.

  • Financial Cushion:

Credit cards can provide a much-needed financial cushion for business owners when accounts receivable is delinquent, sales are slowing, or the company is short on cash.

Demerits of getting a business credit card

To be informative and to help you, let you all also come across certain demerits of getting a business credit card which can be very well avoided if we remain preventive enough while swiping our cards.

  • More Expensive:

A small business credit card's convenience and ease of use come at a price. This is because they typically charge much higher interest rates than small business loans and lines of credit offered by banks. This interest can quickly add up if your card activity is not repaid in full each month on time. 

  • Personal Legal Liability:

Many small business credit cards require a personal liability agreement (personal security) to pay off your debt. This means that a late or late payment can lead to a negative personal credit report and the inability to borrow money personally.

  • Fluctuating Interests Rates:

Unlike loans and lines of credit, the company that issues your credit card may change your interest rate based on how you use and manage your account. As such, it may be worthwhile to be aware of how tariffs work and are subject to change.

Why choose ESPECIA for getting consultancy over a business credit card:

In today's modern world, a thin rectangular piece of metal is the everyday perspective of human life. 

From early morning until late at night, the use of bank cards is part of everyday life. 

Many different types of cards on the market serve different purposes. Credit cards offer instant loans with high limits. 

You can pay later using your limited money. Interest must be paid, but many prefer the credit route. The process of lending money is easy and fast.

Here at ESPECIA, we provide expert advice and accurate guidelines regarding all the procedures one needs to know to avail of one for the same. 

We make the process easy for you by collecting and finalizing all your documents before applying for them at the bank to avoid unnecessary hassle.

Conclusion

The business credit card offers many benefits, including ease of use, easier to obtain than loans, financial cushion, and the ability to separate business spending from personal credit card spending.

Despite their advantages, business credit cards should be used with caution as interest rates on the cards are higher than loans, and business credit cards are less secure than personal credit cards.

FAQs related to How to apply for a small business credit card

1. Can I use my EIN to get a credit card?

An Employee Identification Number (EIN) is a tax quantity assigned to your enterprise with the aid of using the IRS. It can be used to use for a small enterprise credit scorecard. However, in most cases, you will also need to provide your social security number to receive your card.

2. What do you mean by a corporate credit card?

A corporate credit card is a credit card issued by a company to its employees. It acts as a personal credit card but is only intended for business expenses such as travel, business meals, and other customer-related expenses. With a company credit card, you can pay for these expenses so that your employees pay out of pocket and don't have to wait for a refund.

3. What about customer satisfaction and knowledge?

At ESPECIA, we have a team of experts to meet your needs. Our talented team provides our clients with the best lending expertise.

4. What do you mean by credit score?

A credit score is a number from 300 to 850 that evaluates a consumer's creditworthiness. The better the score, the higher the borrower appears to capability lenders.

Contact Us for Accounts Receivable ServicesBookkeeping Services Outsource Accounting ServicesAccounts Payable ServicesAccounting Service For Startups , ESOP Services , GST Services  in Delhi, Noida, Gurgaon, and all across India: write to us at accounts@especia.co.in. Or Call On :(+91)-9711021268 +91-9310165114

- Share this post on -

Especia in news

Contact us