Every business, large or small, can benefit from having a dedicated card for business use. Where debate arises is whether it’s better to invest in business debit cards or business credit cards. Which of these spending types is best for the business you intend to run?
Here are some critical factors that you need to keep in mind as you make your decision.
What Is a Business Debit Card?
Business debit cards, as one might expect, are debit cards dedicated for business use alone. There are three main types of debit cards that businesses may use, including:
- Standard debit cards, which get used the same way as personal debit cards, just tied to a business bank account
- Electronic benefits cards, which businesses can accept as a payment method, even if they don’t use one themselves
- Prepaid debit cards, which get loaded with a predetermined amount of cash that can get reloaded at a later date
All told, business debit cards offer many of the conveniences personal debit cards do. The only difference is that they’re tied to different accounts.
What Are the Benefits of a Business Debit Card?
Business debit cards benefit from their ease of access and use. It’s easier by far to set up an account for a debit card than a line of credit. However, this also means that you face greater liability and losses in the event of fraud.
You may also have to deal with overdraft fees, ATM fees, and other banking inconveniences. However, if the thought sounds better than paying interest on a balance owed, you can learn more about virtual cards from Bento.
What Is a Business Credit Card?
A business credit card is, well, a dedicated line of credit for your business. This can help absorb some of your startup and overhead expenses, which is a godsend for any new business. Depending on the provider, you might also receive special rewards that can help your business save money on its regular expenses.
What Are the Benefits of a Business Credit Card?
The biggest benefit of a business credit card is that you don’t have to have the money for purchases on hand right away. You can pay for large expenses taken in your business’s name over time, rather than dropping the cash up-front. However, that does require that you pay interest on your initial balance over time.
Additionally, getting approved for a business line of credit requires that you have decent credit, to begin with. If your credit score doesn’t hold up to scrutiny, you won’t get the funds you need.
Business Debit Cards vs Credit Cards: Let’s Review
The primary difference between business debit cards and business credit cards is their access to funds. Business debit cards can save you in interest expenses and offer easier access, but force you to have the funds for any expenses up-front. Business credit cards allow you to pay off expenses over time and offer rewards but can punish you with astronomical interest rates.
It’s up to your personal discretion which you prefer. However, if you need more information to make your final call, check out our blog each day for more content like this!