Published On: Tue, Oct 15th, 2019

funding for sme: Taking a credit card for your business: How to pick one

By Rishi Mehra

Credit cards have become an essential part of our lives and much of it is because of the utility it provides. Widely accepted across the country, it allows us to carry out transactions even if we have very less cash on us. Like a credit card for an individual, there are specialized credit cards for businesses. While many small business owners use their personal credit card for business purpose, it is not advisable as you may miss out on certain key features and benefits. Above all it is never smart to mix your personal and business expenses together. In fact, most banks are pretty aggressive in pushing credit cards with attractive features for businesses.

To ease the process of picking up the right credit card for your business, we list a few things that can help you narrow your choices.

Suiting your need – At the outset you should understand what you need the credit card for. Spends on credit cards are actually unsecured loans and go on to affect your credit rating. Needs can be different, ranging from making purchases for business or making vendor payments. One can also have a business credit card for employees, where a specified limit can be set. Such cards will also allow you to come up with spend tracking, generate reports, make a detailed analysis of your spends, which will enable easy integration with your accounting solution.

Offers- Credit cards for both individuals and businesses come bundled with offers so that it encourages the user to swipe more. Offers on credit cards can work out well, so you need to see what works out best. For example, some business cards allow you to collect air miles that you can redeem for an air ticket. Some allow airport lounge access, while others give you points when you buy fuel from a petrol pump. Some cards give you points when you use it for dining or entertainment purpose. Examine the cards on offer and figure out what works best for you.

Interest rates and Fees – Credit cards have some of the highest interest rates, so one should take a look at the rates being quoted by the bank. Banks sometimes quote interest rate on a monthly basis, so do make sure you annualize it to get a complete picture. Most credit cards also give you 48 days of interest-free credit period for all your online transactions or purchases at merchant outlets. This can prove to be handy when undertaking day-to-day transactions. Also, keep an eye out for the fees that the card charges. Most business cards have an annual subscription fee that can range anywhere between Rs 500-Rs 5000. Decide which card you would want and look at all the fees that come along with it – overdue fees, fees on cash withdrawal etc.

Credit limit – Credit limit is a function of different things, which includes your perceived credit risk and profile, you should always ask your credit card issuer on what the limit would be. You will have to tread a fine line between ensuring you are not stuck with a card that has very low credit limit or go for a card that have huge credit limits. Always remember credit card limits are perceived as open loans, unsecured in nature or something that you can tap into without actually having any collateral for it. Do remember that too much of unsecured loan or the potential for it can skew the nature of your credit profile.

At the end do remember to shop around and ask questions. If you make international trips, you may want a card that is exclusively geared towards that.

(The writer is, CEO,

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