A credit card is issued by financial institutions to allow the holder to borrow money or pay for goods and services. A credit card is issued on the condition that cardholders will repay the borrowed amount of money along with interest charged. Over and above using credit cards to pay for goods and services, the issuer may provide a line of credit to enable cardholders to get a cash advance (Elliehausen & Hannon, 2018). The most significant features in choosing a credit card for a business are fees, acceptance, perks (added benefits), and credit limit. Credit card fees encompass interest rates (referred to as the Annual Percentage Rate (APR)), annual fees, and the penalty for late payment. Card issuers set borrowing limits that have an impact on cardholders’ credit rating.
The features of a business credit card include accounting (it may merge business expenditures into a single monthly payment and make it easy to verify expenses) and cash flow (if a business is continually managing immediate expenditures and uncertain payments, credit cards may bridge it over). Another feature of a business credit card is the existence of rewards: the payment of an organization’s expenditures using credit cards offers a company significant benefits that are particularly handy for organizational travel. Business credit cards have numerous disadvantages. For instance, they charge high rates of interest when compared to personal credit cards, even though they are tax-deductible. Credit card rewards characteristically entail annual charges, which makes their holders prefer to use the benefits acquired to cater for the fees charged (Quan & Nam, 2017). Another disadvantage is that the credit ratings of a business may be damaged if the organization fails to pay off the borrowed amount in time or exceeds the limit.
References
Elliehausen, G., & Hannon, S. M. (2018). The Credit Card Act and consumer finance company lending. Journal of Financial Intermediation, 34, 109-119. Web.
Quan, V. D. H., & Nam, T. H. (2017). Perceived risk and the intention to use credit cards. International Research Journal of Finance and Economics, 1(159), 76-89.