4 reasons why you need a new credit card for your business

Small and Medium Enterprises (SME) play a vital role for the growth of the Indian economy by contributing strongly to GDP and by generating millions of jobs. An important aspect of running successful small businesses is having access to advanced payment and expense management programmes.

Business Credit Cards are a great enabler in this endeavour, especially with increased electronification of payments. Moving cash- based payments to cards and knowing how a business credit card can help run an efficient business is a critical contributor to success.

We believe the following four reasons will help determine SME owners to evaluate their choice of the next business credit card:

Tool for better expense management: A complete business credit card solution not only offers benefits of a personal credit card but helps segregate and track expenses better. This includes issuance of cards to business owner and employees with tailored limits as per usage patterns. Online services like access to past statements, MIS to track expenses by merchant type and ability to allow or restrict international usage or not permitting usage on certain merchant categories can help ensure better controls. 

Savings and convenience: Given the large spends that business owners charge to their card, it is important that their card is the most rewarding. Benefits like strong rewards programme with points that never expire, ability to redeem reward points real time towards flight or hotel bookings delivers genuine value.

The total value of reward points earned per Rs 100 and its redemption value is another critical determinant. Discount offers in categories like travel, dining and office supplies, among others help in maximising savings.

Benefits like complimentary airport lounge access are big on convenience and savings while travelling overseas. Business owners must also look for perks like complimentary membership of airline or hotel programme, annual spends linked bonus reward points or complimentary overseas mediclaim covers to ensure they get the best value for their business expenses.

Working capital, business credit and higher credit limits: Business cards also serve as means of working capital for small businesses. Applicants must look out for features like low interest rate on revolving credit, balance transfer at attractive interest rates or special introductory interest rate on joining to better manage cash flows.

This is over and above the interest of free period available when the payment is made in full on payment due date. A strong case in favour of a good business credit card is the ability to build good business credit other than personal credit. This can help borrow at preferential rate for business loans or other lending products. Right credit limit based on business financials is also a key consideration for a good business card to ensure all monthly expenses can be charged to the card.

Fee and charges: The total cost of ownership is an important determinant of a good business credit card. Business owners must look for details like joining or annual fee and joining privileges like welcome reward points or free tickets or hotel membership offered against the fee, interest free period, interest rate, foreign currency mark-up and other charges like late payment, etc.

This in combination with annual savings through product features gives the complete picture while making the right decision.

A true business card is much more than a plastic for making payments. It can go a long way in partnering the efficient working of a small business enterprise.

This is possible when banks offer customised payment solutions to the SME segment, offer reporting capabilities that help track and control expenses, and most importantly, provide a conducive fee and charges structure that encourages adoption of business credit cards.

The move towards a less-cash society, micro and small enterprises joining mainstream of electronic payments and right solutions from banks augur well both for business owners as well for the growth of the economy.

(The writer is Senior Group President, Retail and Business Banking at YES Bank)