Using payment cards for your business

There are advantages to using payment cards in your business - particularly when cards are issued to staff. But there are several disadvantages to be aware of too.

Advantages of using payment cards for purchases

Advantages of using company credit, debit, charge or pre-paid cards to make purchases include:

• 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 cards can offer an interest-free period of varying lengths, 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• Fast access to cash - cash can be withdrawn from ATMs. However, card issuers may levy a commission and - if given on credit - interest is payable from the day the cash is withdrawn.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.

Disadvantages of using payment cards for purchases

Even though you can usually set maximum spending limits on employees' cards, be aware that you're giving your employees the opportunity to spend company money unchecked.

As with personal payment cards, you are also open to the possibility of two further major drawbacks.

• Card fraud - if the card details are discovered or revealed, you may find fraudulent purchases appearing on your statement. If this is due to an employee's negligence, your business will be liable for the payments. Access Take Five's business advice.
• 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, if you make purchases with a credit card and don't pay off the bill in full, you'll incur interest charges.
• 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.