Business Credit Cards: How they can streamline your business expenses | Mint

Credit cards are not just for the salaried and those with a steady stream of income. Banks also offer credit cards to entrepreneurs with a host of benefits that help them manage their short-term requirements involving regular payments for business expenses such as rent, travel and utility bills. Here is a summary of what business credit cards are, their features and the eligibility requirements.

Business credit cards

Business credit cards are just like personal credit cards. The main difference is that unlike regular cards they are given only to self-employed persons, proprietors and partners of partnership firms. A business credit card is issued to self-employed persons and entrepreneurs who are aged between 21 years and 65 years.

These cards are issued entirely based on the ITR (Income Tax Returns), GST Returns and latest bank statements. Banks typically provide these cards to persons/firms with an ITR of ₹6 lakh. But there are lenders who offer them to those with a yearly earning of ₹4.8 lakh in ITR.

Regular documents that authenticate address and identity (Aadhaar, PAN card, Voter ID card, Driving Licence and Business Registration details) and income (ITR, GST Returns and bank statements) should be provided to avail these cards. Apart from ITR and GST returns, the applicant’s credit history and relationship with the bank plays a key role in getting the business credit card.

Business credit cards give a host of benefits in the form of cashbacks for regular expenses such as travel, accommodation, rent, utility bills and foreign currency transactions. Businesses with frequent travel needs can get perks such as free access to airport lounges, discount vouchers on flights and hotels and dining benefits.

Such cards also offer complimentary membership of premium holiday and leisure clubs and hotels, complimentary access to golf clubs and lower mark-up fee for foreign currency transactions. Several business credit cards charge lower interest charges for late payment of dues. Most business credit cards offer a fuel surcharge waiver of 1%.

How different are business credit cards from regular ones?

The liability structure of business credit cards is completely different from regular cards. While only the individual cardholder is liable for personal credit cards, the liability structure for business credit cards are categorised as “sole liability, individual liability, joint and several liability”. The liability structure of the business credit card is decided at the time of application.

Sole liability: If the company/firm and the cardholder avails the card facility with ‘Sole Liability’, the company/firm shall be primarily liable at all times for the usage of the card and for payment of all applicable charges, fee and dues. Simply put, only the firm is liable for the dues.

Joint and several liability:If the company/firm and the cardholder avails the card facility with ‘Joint and Several Liability’, the company/firm and the card member shall be jointly liable as well as severally liable at all times for the usage of the card and for payment of all applicable charges, fee, and dues. In this case, both the firm and the cardholder are liable for the dues both jointly and separately.

Individual liability:If the company/firm and cardholder avails the card facility with ‘Individual Liability’, the card member shall be primarily liable for the usage of the card for payment of all applicable charges, fee and dues. Under this, only the cardholding member, who is usually the owner, is responsible for the dues.

What happens if the cardholder leaves the firm?

Banks have a clearly defined procedure that is to be followed when the cardholding member leaves the firm. This applies in cases where the card is issued under ‘Sole Liability’ and ‘Joint and Several Liability’. The firm has to inform the card issuing bank about the development. Till the time such an intimation is given, all expenses made on the card held by the cardholder will also be the liability of the firm. The bank will block the card once it receives intimation about the resignation of the cardholder.

What is the credit limit on a business card?

The credit limit on a business card varies with each bank. The credit limit is determined by the financial health of the business, the credit history of its owner and the policies of the card issuing bank.

Can you use business cards for personal expenses?

Though the line separating the firm and the entrepreneur is quite slim, it is generally not advisable to use business credit cards for personal expenses. This will be quite helpful for taxation purposes. “Combining personal and business expenses may make it difficult to report business-related expenses for tax purposes,” according to HDFC Bank.

Allirajan M is a journalist with over two decades of experience. He has worked with several leading media organisations in the country and has been writing on mutual funds for nearly 16 years.