This article is part of our guide to business credit cards.
You likely get a dozen or more business credit card offers a month, and their welcome offers and signup bonuses probably all look roughly the same—a waived initial annual fee, low intro APR or interest rate, bonus points, membership rewards, and so on. But do these benefits actually impact your company’s bottom line long-term?
Here at Ramp, we’ve got a few opinions.
Technically, we offer a charge card, not a credit card. But after obsessing over corporate finance for years, our team is pretty familiar with the credit card landscape. We’re here to help you strengthen your bottom line by laying out the must-have benefits of business credit cards—ones that will bring tangible value to your organization.
Cashback is probably the most obvious contributor to your bottom line when it comes to the benefits of business credit cards. With this benefit, a percentage of what you spend is refunded to your account, where you can cash it out or use the amount as a statement credit.
You should look for cashback rewards versus a points rewards program because of the consistent value over time. While a points rewards card can be tempting because of the aspirational value (i.e., business travel credit card rewards, such as upgraded hotel stays and airfare), cashback rewards provide real monetary value.
Because of the way points rewards work, they can also lose value or change over time due to exchange value, rewards partners changing their terms, or the credit card company switching to an entirely new partner. However, cashback is a straightforward value that won’t change on the whim of a rewards points program. $100 cash today will still be $100 cash tomorrow, regardless of how the rewards program may change.
"While a points rewards card can be tempting because of the aspirational value (i.e., business travel rewards, such as upgraded hotel stays and airfare), cashback rewards provide real monetary value"
It’s also easy to redeem cashback rewards, unlike points systems which often have rotating spending categories and limits on how you can earn and use them. According to Bankrate, 3 in 10 people don’t even redeem their credit card points rewards. With cashback, there are rarely limits on how many cash rewards you have to have accrued to redeem them or hoops to jump through to do so.
Before choosing your cashback card, read its terms carefully to gauge how they may change over time. Look for business credit cards with transparent cashback rewards on every purchase with no annual caps or category limits for eligible purchases to get the most value.
For example, some cards may advertise an impressive 5% cashback, but that also comes with an annual cap each calendar year and only applies to specific categories during certain quarters—so earning cashback is a constantly moving target. You don't want your cashback benefits to be limited to only purchases made at gas stations or airport lounges.
Some credit cards will offer partner rewards—vendor discounts in the form of credits, percentages off, or exclusive access to services. They’re distinct from points rewards, as they are not accrued by card spend but are perks received upon account opening.
To get the most immediate bottom-line value from this business credit card benefit, look for partner rewards that offer discounts on services you already use or dollar amount credits toward services. For example, if you’re already using Amazon Web Services(AWS), then find a card that gives you AWS credits or discounts that can help you reduce AWS costs.
The key to protecting your budget is to set clear guardrails for employee spending. Customized card controls are a powerful way to automatically enforce your expense policy. Customized card controls allow you to limit who spends, how much they spend, and where they spend.
When evaluating card controls, find solutions that answer the 5 W’s (who, what, when, where, why). Your card controls should be able to dictate precisely:
These controls will help you gain real visibility into your business spending and manage it effectively.
Many credit card issuers will limit how many cards can be issued to employees, which can create problems as a company scales.
Say you’re only allowed ten cards, but you have 25 employees who need one. People will likely need to share these cards, which can create spend visibility issues. You might not know who made a purchase, and you won’t be able to set personalized controls on a universally used card.
Many business purchases will likely end up on personal cards as well, which does nothing to build your company's credit history or business credit score. Personal card use also increases the number of expense reimbursements your finance team will have to process. With unlimited cards, these issues are no longer a concern.
While unlimited employee cards offer spend visibility and ease, security and control are more important than ever as you increase the number of cards. Make sure to look for cards with personalized pre-approval controls, so you don't have to worry about risk exposure from the number of cards issued.
You may also want to consider offering virtual cards as an alternative to physical cards, which can help reduce the number of cardholders. With a virtual card option, you can easily pre-approve an expense for employees who typically only have one-off purchases and don't require a physical card. After the expense request is approved, the credit card software will send them a one-time-use virtual card for the transaction.
Some credit card issuers will require small business owners to personally guarantee their business's debt in the underwriting process of acquiring a company credit card for their new business. However, if a founder or business owner signs an agreement where these terms apply, their personal assets are at risk of being taken.
To satisfy the business's debts in the event of a default, the lender can take anything from personal liquid assets, such as money in the bank, to non liquid assets including real estate and even personal vehicles if the debt cannot be recouped from business assets. The lender can even hold a business owner personally liable for any legal fees incurred for pursuing debt repayment.
It may be tempting to do whatever it takes to get business cash flow in the early days of establishing your business, but making yourself personally liable for your small business credit card is a significant risk you should avoid. In the words of one entrepreneur and investor, Erik Severinghaus, who experienced this very thing, "never, ever personally guarantee your startup."
Look for credit card companies that consider the overall health of your company as their guarantee of creditworthiness rather than your personal assets. Be sure to check the fine print of the agreement before signing anything.
The best corporate card should help you save money, not spend it. The easiest way to do this is with a spend management platform that will give you complete spend visibility and control. Unfortunately, not all corporate cards offer spend management software or at the same level as others. Look for integrated spend management software that will:
Taking the time to secure the right corporate card for your organization is anything but time wasted. A card with strong benefits will help you bolster your company’s financial security and embrace opportunities for growth.
With the right card and spend management software in hand, you can start to implement expense policies that pre-approve spend requests and block out-of-policy charges before they take place. Not sure where to begin? Check out our e-book on creating modern expense policies.