Credit Card Uses

Business credit cards can be used to make any purchase that could be made using a personal credit card. Transactions such as paying for gasoline in a company car, buying needed supplies for the business, or taking a customer out to breakfast are all totally acceptable kinds of uses for business credit cards. However, there are may other uses for business credit cards including:

• Extended Financing : If a company needs to purchase equipment such as a telephone system or a computer, rather than using its cash reserves or waiting for approval on more structured financing through a bank, a company can use its business credit card to purchase the items immediately. By making monthly payments on the credit card instead of paying the balance in full, the company has the ultimate flexibility to decide how much the payments should be (as long as they are at least the minimum monthly payments required) and how long it should take to pay the balance in full. Unfortunately, one of the drawbacks to using business credit cards is that the interest rates on company credit cards are usually much higher than traditional bank financing.
• Cash Advances : If a company needs to have access to cash and is low on its cash reserves, it can use a business credit card to get a cash advance. Typically the cash advance limit on a business credit card is lower than the total spending limit, and the interest rates may be even higher than those for actual purchases. However, the value of having access to cash on hand is often worth the expense.
• Simplifying Accounting : Accounting is made much simpler when business and personal expenses are segregated by separate credit cards. When personal credit cards are used for personal expenses and business credit cards are used for business expenses, bookkeeping tasks like tax preparation are much easier. Business credit cards will often issue year-end statements that categorize your annual expenses into familiar tax categories (such as postage, business publications, etc.) that simplify tax preparation.
• Expense Accounts for Employees : There are many tax advantages to using business credit cards, including using them for pre-authorized expenses made by employees. Reimbursements by the company for substantiated business-related charges (such as business travel) are not taxed as long as they are included in an “accountable plan.” For more information on accountable plans, see IRS Publication 463 at www.irs.gov.
• Medical Benefits for Employees : If a company provides health benefits for its employees, spouses, and dependents through Health Reimbursement Accounts (HRAs) or Flexible Spending Accounts (FSAs) on a tax advantaged basis, business credit or debit cards can be given to employees to pay for these services. For more information on medical plans, see IRS Publication 969 at www.irs.gov.
• Additional Benefits : Business credit cards often offer a wide array of fringe benefits that may benefit your company. Services such as travel assistance, purchase protection, and Value Added Tax (VAT) reclaim services where a business can reclaim any VAT it might have paid are all very useful services than a business can take advantage of when it has a company credit card.