From purchasing raw materials to buying air tickets for attending a conference away from home, everything is considered a business expense. Not only for small businesses, but it is also challenging for a large enterprise to meet day-to-day requirements without any financial assistance. Therefore, irrespective of the business size, all business owners find it convenient to have business credit cards as a financial backup.
If you are a newbie entrepreneur thinking of applying for a business credit card, read the article to have a clear idea.
Table of Contents
What is a Business Credit Card?
Business credit cards are pretty similar to personal credit cards. The only difference is it is specifically meant for businesses to meet various expenses like purchasing stationery, furniture or air tickets for business travel.
Businesses, typically startups, hand over the credit cards to the employees to pay for operational expenses, which the company clears before the due date. It helps the company track the monthly expenses and avail special benefits.
How Do Business Credit Cards Work?
Businesses apply for credit cards with or without Employer Identification Number (EIN) with leading lending institutions. After which, the issuer or the lender performs due diligence. Although credit cards are readily available and issuers don’t ask for much, they do consider your business credit score and personal credit score.
Once the credit card is approved, you can start spending on your business expenses. But do remember that interest on credit cards are generally higher than secured business loans as the lending institutions offer you credit without any collateral; hence is an unsecured debt.
However, a few lending institutions offer secured business credit cards for businesses with bad or no credit history. Moreover, the lending institutions charge penalties for late dues, which are again on a higher note so it is advisable to avoid such scenarios.
Types of Business Credit Cards
Basically, lending institutions offer two types of business credit cards.
- Unsecured Business Credit Cards
Business credit cards are primarily unsecured provided to applicants with an excellent personal and business credit history and credit score. As the name suggests, it is unsecured, which means the leading institutions approve the credit card without any underlying collateral.
- Secured Business Credit Cards
Small businesses with no credit history or bad credit scores are offered Secured Business Credit Cards. The cards are given against some collateral to recover the amount if the borrower defaults.
Features of Business Credit Card
- Unsecured debts (only a few lending institutions offers secured credit cards)
- No collateral required
- Slightly higher interest rate
- Higher spending limit
- Penalty charges for late payment of dues
- Can be applied without an Employer Identification Number (EIN)
- Helps monitor employee spending
- Offers rewards and benefits
Best Business Credit Cards for Startups in India – A Comparative Study
Here are some of the best business credit cards in India.
| Basis for Comparison | SBI Prime Business Credit Card | HDFC Business MoneyBack Credit Card | Axis Bank My Business Credit Card |
| Joining Fee | INR 2999 | INR 500 | INR 999 |
| Annual Fee | INR 2999 | INR 1000 | INR 499 |
| Interest-Free Period | Nil | Maximum of 50 days | Nil |
| Rate of Interest | 3.35% per month or 40.2% per annum | 3.49% per month or 41.88% per annum | 3.25% per month or 46.78% per annum |
| Cash Withdrawal Limit | 80% of the credit limit subject to a maximum of INR 12,000 per day | 40% of the credit limit | 2.5% of the credit limit (Min. INR 250) |
| Late Payment Fee | -Up to INR 200: NIL -INR 201 to INR 500: INR 100 -INR 501 to INR 1000: INR 400 -INR 1001 to INR 10,000: INR 600 -INR 10,001 to INR 25,000: INR 800 -Above INR 25,000: INR 950 | -Up to INR 100: NIL -INR 101 to INR 500: INR 100 -INR 501 to INR 5000: INR 500 -INR 5001 to INR 10,000: INR 600 -INR 10,001 to INR 25,000: INR 800 -Above INR 25,000: INR 950 | -Up to INR 2000: INR 300 -INR 2001 to INR 5000: INR 400 -Above INR 5,000: INR 600 |
| Rewards & Benefits | -Welcome gift -Reward Points for spending on Dining, Utility Bills payments and Office supplies -Fuel Surcharge Waiver -Renewal Fee Waiver -Complimentary Club -Vistara Silver membership -Complimentary Lounge -Access Flight Discount on booking and many more | -Reward points on online purchase -Reward points on fuel -Cashback on Telecom, Utility, Govt and Tax Payments -Fuel surcharge waiver -Discount on dining, and many more | -Fuel surcharge waiver -Lounge access -EMI option -Loyalty rewards for transactions |
Business Credit Cards Eligibility Criteria
The lending institutions have different eligibility criteria to apply for business credit cards. Here are a few general eligibility criteria the applicants must meet to apply for a business credit card.
- The business must be operational for a specific period as prescribed by the lending institution.
- The business must generate a specific amount of turnover or profit required by the lending institution.
- The business and the owner must have a good credit history and credit score.
Who Can Apply for a Business Credit Card?
- MSMEs
- Limited liability companies
- Banks
- Public sector companies
- Multinational companies
- NBFCs
- Sole proprietorship firm
- Partnership firms
Reasons to Apply for a Business Credit Cards
Here are a few benefits of getting a business credit card.
- Easier to manage the expenses
- Availability of credit without collateral
- Secure transactions
- Rewards for spending on utility bills, online purchases, and dining
- Access to airport lounges and discounts on air tickets
Note: The awards and benefits offered on a business credit card depend on the lending institution.
Takeaway
Having a business credit card allows the business founder to separate the business expenses from the personal expenses and, at the same time, offers a lot of perks. Despite that, before applying for a credit card, always check for additional charges and whether it meets your business requirements.
