This past year, credit cards became the most preferred payment form.¹ In addition, a 2015 study by the Association for Financial Professionals (AFP) suggested that the cost of cutting a payable check is around $3.00,² with other studies indicating that it’s closer to $4.00.3 Multiply that by the number of checks that a business cuts per month and the figure may be surprising.

With the increasing acceptance of non-cash or check payments in addition to the costs of cutting and mailing a check, companies are turning to credit cards for daily business needs.

If managed and administered correctly, credit cards can offer huge benefits to companies of any size; however, it’s important to understand the risks as well.

Primary Types of Cards

Small Business Cards

A small business credit card is typically designed for LLCs, S corporations, and partnerships – or generally companies of up to $7 million in revenue.4 They are typically guaranteed by at least one individual, usually an owner or partner, and are used for a wide range of business-related expenses.

A small business credit card can help these types of companies by:

• Providing credit and cash flow options – These options can help ease tension during slow times or when cash collection becomes difficult.
• Improving business credit – Often, businesses with a brief company history can have a hard time getting formal business loans from a bank. Making payments on time, staying within the credit limit, and keeping balances moderate can have an immediate positive credit impact for a comany and its owners.
• Separating personal and business finances – Small business owners sometimes have to tap into personal finances or leverage personal assets to fund operations, which can prove stressful for them and their families.

Corporate Cards

A corporate credit card carries similar benefits, but is intended for larger, multi-million dollar companies with several users. Approval can be much stricter than small business cards and usually require companies to submit their financials; however, these cards rarely require a personal guarantee.

Time-savings is an important aspect of a corporate credit card program. Instead of waiting for individuals to submit expense reports for processing and reimbursement, charges can be automatically accrued without the need for employees to pay out of pocket.

Corporate cards may have stipulations, often called “no balance carry” provisions, which require the balance to be paid in full each month. Though acceptance of a “no balance carry” provision may net a higher rebate or bonus, it’s a key consideration when selecting a card.