Being able to smoothly manage cash flow and everyday transactions is an important aspect of running a small business. This includes paying bills, financing space or equipment, and all other daily costs. Good money management is the key to your success, and business debit credit cards are a couple of financial tools you can use to keep your money management in check.
Here we’ll walk you through the ins-and-outs of business debit and credit cards to help you determine if one or the other (or both) is right for your business, and when you might want to use them.
Business Debit Cards
A business debit card functions much like a personal debit card and gives you immediate access to the cash you have in a small business checking account. The main benefit of using a debit card is avoiding overspending, as you can only spend as much as you have in your account.
Most debit cards also have access to thousands of surcharge-free ATMs around the country when you need to make a cash purchase. For example, the Republic Bank debit cards have access to over 55,000 ATMs nationwide.
When researching a business debit card, it’s important to consider some of the benefits that different card providers offer. Business debit cards tend to have less protections under federal law than consumers do, such as limited liability if the card is lost or stolen. However, some debit cards do offer things like zero liability and ID theft protection on eligible purchases so you can have peace of mind that your transactions are secure.
Other benefits you might see include EMV chips for extra security, tap to pay functionality, card controls and transaction alerts, digital access with Apple Pay™, Google Pay™, and Samsung Pay, funds transfer capabilities, and sometimes even unlimited cash back.
Business Credit Cards
A business credit card is like a line of credit for your business that has a predetermined maximum limit. The funds are not taken directly from a linked bank account—instead, the amount of credit you use must be paid back monthly, either in the required minimum payment or the full balance since your most recent statement. Keep in mind, it is best practice to pay your balance in full each month.
If you have a tendency to overspend, it’s critical to be cautious with credit cards. While they can be a useful tool for making business purchases and building your credit, they also come with annual percentage rates (APR) that tend to be a bit steep compared to other forms of financing. If you’re unable to pay your balance each month, you will continue to rack up more and more interest, in turn making it more costly to use a credit card.
An important thing to look out for when researching business credit cards is any annual fees, penalty fees, and transaction limits. Some are quite low while others can be hundreds of dollars, so keep this in mind before deciding. Most credit cards also offer rewards for making your payments, such as cash back on purchases, earning airline miles, or incurring points for retail, hotels, and more. For example, the Republic Bank Visa® Platinum Cash Rewards card offers unlimited 1% cash back on every single person, plus low to $0 annual fees.
A great benefit of using a credit card for your business is being able to strengthen your credit score. The more responsibly you use your credit card and pay back your monthly balance, your credit score will be more attractive to lenders, resulting in better rates and terms for larger financing options like loans. The “golden rules” of a credit card are to never spend more than you can afford, use your card only for necessary business purchases, and pay it off every month.
Which Option Is Right for You?
Simply put, there’s no reason why you can’t have both a business debit and credit card. They each help simplify money management in different ways, and you can streamline both accounts if you open them with the same financial institution.
It’s best practice to use a debit card for any assets you want to pay off immediately as well as time-sensitive bills like utilities, phone bills, and rent payments. Other expenses like gas, business meals, and travel expenses are often good uses for a credit card.
Always do your research before selecting a debit and/or credit card for your small business. There are thousands of options to choose from, so you want to ensure you’re choosing the one that’s best suited for you. If you need additional information about using a business debit or credit card or are interested in opening an account with Republic Bank, reach out to our knowledgeable team by calling 800-526-9127. Plus, take a look through our library of other helpful financial tips.
