5 Reasons Why SMBs Should Avoid Business Credit Cards

If you’re one of the 28 million small business owners in the US, and looking for ways to finance your business, you may walk away with the best solution at the end of this article.

According to a Small Business Credit Card Survey conducted by the National Small Business Association (NSBA) in 2009, a whopping 59% of small businesses used credit cards to meet their capital needs.

So, is running your start up with a business credit card a great idea?

While conventional business wisdom advocates in favor of using credit cards for small businesses, the recent surveys show that it’s not necessarily a smart idea.

Another survey from the NSBA in July 2011 revealed nearly 42% of small-business owners carried a credit card balance.

So, what’s exactly wrong with using a business credit card for your start up?

Let’s take a reality check…

1. Higher Interest Rate

Despite its inherent benefits, a corporate credit card typically comes with a higher rate of interest as compared to a fixed line of credit or a bank loan.

Also, some credit card companies may reset the interest rate of your business credit cards based on your usage patterns.

Moreover, if you don’t really monitor your card usage or miss the payment cycle, the interest can add up quickly; meaning substantial losses for your small business.

As per a survey by the NSBA, a staggering 33% of respondents said they received their credit card statement after its due date.

Therefore, unless you want to pay in full and on time, the business credit card can do more harm to your business than good.

2. Personal Legal Liability

The biggest downside of managing your finances with a business credit card is the personal legal liability it carries. If any of your employees abused the credit card, your business would be directly responsible, which will affect your personal credit profile, affecting your chances to get a personal loan in the future.

3. Potential Security Pitfalls

Your business credit card is prone to many potentially fraudulent behaviors and other security issues. For example, an employee can use the corporate credit card for their personal benefit while claiming reimbursements.

Moreover, if no limit is set on a credit card, it can be easily abused which can result in unnecessary losses to your business.

Similarly, there are increasing chances of credit card information being stolen unless it is kept secure. If your employees don’t follow precautions, the business credit card carries a high risk of being hacked.

4. Less Buyer Protections

Unlike consumer credit cards, corporate credit cards almost always promise less or no protections against billing errors. Therefore, if your employees make wrong purchases, you’re going to have a hard time dealing with returns.

5. CARD Act Doesn’t Apply to Business Cards

The Credit Card Accountability, Responsibility, & Disclosure (CARD) Act of 2009 doesn’t apply to business credit cards.

What does it essentially mean?

If you carry a balance on your corporate credit card, you may get hit by a jaw-dropping penalty APR.

In other words, a business credit card will always keep you occupied with the pressure of meeting the payment cycle, taking your focus away from the core business activities.

With the above challenges typically attached to a corporate credit card, it’s not a particularly smart idea to use it for managing the finances of your business.

Thankfully, there are better alternatives that allow you the liquidity and freedom of a credit card while posing no threats or risks to your business whatsoever.

So, What’s the Answer? Enter the Bento for Business Prepaid Debit Card

The Bento for Business Prepaid Debit Card is an easy and risk-free solution for small business owners who want to offer their employees the ability to make purchases independently while maintaining maximum control and visibility.

Advantages of Bento Cards over a Regular Business Credit Card

Bento is Risk-free: While a regular business credit card is prone to fraud, Bento’s business card is prepaid and allows business owners to monitor activities in real-time and set a limit to employees’ spending.  It only works when you, the business owner says so.

Bento is Secure: Unlike a standard credit card, Bento allows the business owner to set a spending limit on every card and control how much money is available. Moreover, Bento uses 256-bit Secure Socket Layer (SSL) encryption to protect your data.

Applying for Bento is Easy: Most business owners can’t qualify for a corporate credit card, but any business owner can apply for a Bento Card by simply providing basic business information and be approved instantly. Cards are shipped to your address within 7 days. It’s that fast!

Bento Costs Much Less: Bento offers four different plans, based upon your usage, including a free plan for a business owner card and one other card. It carries no fees on transactions and there are no interest charges because it is prepaid. So, it could be completely free for your business forever. On top of that, any plan is free for the first two months!

In short, Bento is built for your business!

Still need a reason to sign up for Bento? Speak to us now.