When discussing small business finances, two terms can be frequently come across – debit and credit cards. While debit cards use your available capital for payments, credit cards use your line of credit.
That being said, it is often a confusing decision whether to use credit cards or debit cards.
In this article, we’ll explore which option suits best for your business.
The foremost goal of any business is generating profits. And budget planning is the first step to ensuring the same.
Since they are a form of loan or debt, credit cards can quickly help maintain liquid cash with your business. However, careless expenditure can quickly derail your budget plans, too.
On the other hand, we have business debit cards. And, because they use your available capital, they are far easier to manage. You can even get virtual cards like this for your business and control B2B and B2C payments. Debit cards are by default programmed to limit your expenses since you cannot spend more than what you have.
As already mentioned, payments from credit cards are synonymous with a loan or debt. And as with any form of debt, you would have to pay some interest on the money you borrow.
Besides, for every payment made through a credit card, you’ll be paying a processing fee to your banking institute and credit card company. Whereas, with debit cards, interest and fees are not a problem at all.
First of all, you’re not borrowing any money from a financial institute. So, there’s no interest to pay at all. Apart from this, the fees for processing the payments are also minimally low. Thus, saving you a lot on every payment.
Last but not least is the ease of access. Generally speaking, debit cards are more readily available as compared to credit cards. To get a business credit card, you would need to share your financial details with the card issuer.
On the other hand, for debit cards, you simply need a business account with a bank. And as soon as you open up a business banking account, you can get your debit card. Depending upon the type of card you get and your bank’s TOS, your debit card can be activated within a few days.
Besides, credit cards are far more challenging to maintain. And if lost, they can pose a severe threat to your company’s finances. This is not the case with a debit card. Generally, debit cards are more secure as compared to credit cards.
Debit cards are indeed a great way to manage your business payments. They are easy to procure, operate, and maintain. Besides, they are also cheaper, as already mentioned.
However, if you wish to grow your business, you should also consider having a business credit card. It could help when you lack funds but need them eagerly to carry out essential business operations.
On this note, we leave it up to you to decide which card is best for your business. Suppose you’re comfortably scaling your business with the revenue you generate, then business debit cards are the best choice for you. But, in case you need to scale quickly but lack funds, consider a business credit card. Make sure you read the TOS of your credit company carefully before getting one.