Using a business credit card for expenses
Lots of businesses choose business credit cards as a convenient way of managing expenses. But with so many cards and providers out there, working out the best credit card for business expenses isn’t easy.
Here’s everything you need to know about using a credit card for business expenses.
One of the major benefits of business credit cards is that they can help you increase efficiency. Instead of dealing with employee expense claims or petty cash, you can issue company cards to whoever needs one for business expenses, and manage all of them using one central account.
Once you’ve got a business credit card account, a big plus is the ability to manage multiple users. There are a few ways of doing it, and the specifics depend on the provider you choose, but the general idea is that you can assign different credit limits and spending rules to each user.
For example, if you have one employee that buys the office supplies once a month, and another that travels on business a lot, it makes sense to give them different spending limits. That way, your exposure is limited to a specific pound amount per person, and it’s easier to make sure the cards are being used as intended.
If you’re wondering “what’s the best personal credit card for business expenses?”, the short answer is — there isn’t one. Although using a personal card for business expenses is quite common, it’s not recommended and there are a few reasons you should try to avoid it:
More difficult accounting
Less clear picture of financial position
Harder to apply for finance in the future
Credit limit may be too low
Personal credit issues could affect business’s finances
Separating your business and personal finances has lots of benefits for both. Perhaps the most important reason is that keeping your ‘financial lives’ separate makes it much easier to apply for other finance in the future.
If you ever want to apply for finance — perhaps a personal residential mortgage, or a business loan — having your finances muddled together will make it more difficult for underwriters to get a good idea of your financial position.
You’ll have the same issues as the underwriters too — having utility bills and business expenses on the same card will make it much harder to keep track of things, and you could be unwittingly getting yourself into hot water.
In short, keeping your books clean — in both your professional and personal lives — makes it much easier to have a clear view of where you are, and makes it easier to manage money at work and at home. This is one of the biggest reasons to get a business credit card for business expenses — so you can keep the personal card personal.
Other things to consider
Business credit cards can be used for a variety of different business expenses, but not necessarily all of them. For example, you can use a card to pay for train tickets or online subscription fees, but many suppliers will prefer to be paid via invoice and won’t accept card payments.
Some card providers make it easy to add multiple cardholders and see a breakdown of spending per user. Others will also allow you to set individual spending limits, or create your own tags or categories for transactions — which can be a big help for reconciliation.
Start with your situation
If you’re considering a business credit card for expenses, you should start by thinking about what you’re going to use the card for, what type of rewards you want, and what kind of user management you need.
You should also think about whether the card is more for managing expenses, or for managing cashflow — if you’re going to use it for borrowing rather than paying in full every month, the things you’re looking for will be a bit different, and it might be better to look for a card that offers a long interest-free period, for example.