Business debit and credit cards

Advantages and disadvantages of using business debit and credit cards

Guide

Using business credit or debit cards to make payments can bring a range of benefits, but you should also be aware of the disadvantages.

Advantages of using business debit and credit cards

Using company credit or debit cards to make purchases offers a number of key business benefits:

  • Convenience - cards are quicker and might be cheaper to use than cheques. They're useful for everyday expenses and can be used over the phone and internet.
  • Credit - credit or charge card bills can offer an interest-free period of up to 56 days, dependent on which card issuer you use.
  • Most cards are globally recognised - using cards for foreign travel purchases may give you better exchange rates. 
  • Ability to monitor expenditure - you can specify which employees receive cards and set different credit limits for each card.
  • Fast access to cash - cash can be withdrawn from cash machines. However, card issuers may levy a commission and interest is payable from the day the cash is withdrawn.
  • Reduction in administration - with a company credit or charge card, you pay one bill each month, no matter how many purchases you make. Itemised monthly statements can help with your accounting and administrative procedures and make it easy to distinguish business from personal expenses. 
  • Contactless payment technology - contactless cards utilise the security built into chip and PIN cards and can be used for transactions of £100 and under.

Disadvantages of using business debit and credit cards

There are also some disadvantages when using debit and credit cards:

  • Unchecked spending - even though you can usually set maximum spending limits on employees' cards, you should be aware that you're giving your employees the opportunity to spend company money unchecked.
  • Payments must be honoured - your business has to honour every payment made by employees using the cards, regardless of whether you authorise it or not - look for cards that allow you to place restrictions on the purchase of certain things such as petrol.
  • Card fraud - if the card details are discovered or revealed, you may find many purchases worth thousands of pounds wrongly appearing on your statement - you can get tips on preventing card fraud with the Money Advice Service.
  • Debt - with the convenience of a plastic card and the time lapse between purchase and payment, it can be tempting to overextend yourself and build up debts for the business.

Remember, too, if you make purchases with a credit card and don't pay off the bill in full, you will incur interest charges, which can easily mount up.