Options available for SMEs’ purchasing and travel needs have proliferated, with myriad cash-back, points, miles, and other benefits. Tools for managing business credit cards are increasingly part of the mix, as are giveaways such as free subscriptions to business productivity and HR apps. To differentiate their offerings, some financial services companies have also been lowering barriers to adopting business credit cards, including in the areas of credit history, supplier acceptance, interest rate uncertainty, and foreign exchange costs.
Business Credit Card Market Registers Growth and Change
“The small business credit card market in the U.S. stalled during the economic downturn but has rebounded with continuous growth,” according to the Mercator Advisory Group. In the U.S. small business sector alone, Mercator said companies will use cards to make $686 billion in purchases in 2022, up from $493 billion in 2017.1 Overall, the Aite Group notes, “as growing numbers of firms focus on their own digital transformation to meet clients’ changing needs … commercial cards are poised to satisfy both buyers’ and sellers’ need for data-centric and flexible payment solutions.”2
Beyond cards, though, the financial services sector itself became more complex in 2018. Competition in credit cards and other services is expanding among established banks and so-called “challenger banks,” with labels like fintechs, neobanks, nonbanks, mobile-only banks, and beta banks. “In the myriad emerging players, it can be difficult to identify the different segments,” according to PA Consulting.3
Business credit card categories underwent technology-induced expansion and blurring in 2018. Their ranks now include a variety of classic business credit cards, charge cards, travel cards, virtual cards, purchasing cards, co-branded cards, ghost cards, on-demand (tokenized) cards, and prepaid cards. An Indian bank has even launched a two-chip card that can be used for both debit and credit.4
Small businesses underscored their credit card priorities in a 2018 Mercator survey: no annual fees (79 percent), good customer service (78 percent), generous credit lines—over $10,000 (77 percent), rewards (75 percent), and competitive interest rates (74 percent). Their preferred reward is cash back, over airline travel miles or points toward merchandise such as office supplies and phone bills.5
SMEs’ Multiple Uses of Business Credit Cards
After payroll, travel and expense programs represent the second-largest line of expenditure for many businesses worldwide, according to the London School of Economics.6 So SMEs are now being offered a vast array of business travel options, cutting across various aspects of organizing, buying, paying, and monitoring business travel and expenses.
In other business-to-business (B2B) transactions, where alternatives such as ACH, wire transfers, and checks have predominated, suppliers are increasingly accepting credit cards and virtual credit cards, as well. “The popularization of B2B card payments in the supply chain is enabling dramatic change,” according to a report in PaymentsJournal. “Card payments enable large parts of the payments process to be automated and streamlined, reducing administrative headaches for procurement teams and suppliers alike.”7 Among additional uses, “business credit cards can be a valuable tool for entrepreneurs trying to build credit, smooth over temporary cash flow issues, and keep business and personal expenses separate,” according to CreditCards.com, a credit card marketplace.8
A Kaleidoscope of Business Credit Card Offers
A growing subindustry of online credit card comparison sites underscores the range of business credit cards on offer, documenting a large variety of terms, conditions, rewards, and other benefits. A sampling on The Points Guy comparison site includes: more points in categories where an SME spends the most; no personal liability; up to 200,000 bonus miles in the first six months; $0 annual fee in the first year; free employee cards; easy integration with accounting software; tens of thousands of bonus points in the first three months; extra points for buying ads online; cell phone protection; high limits; low interest; no credit history; “clever algorithms”; and no overdraft fees, late fees, or international fees.9
Some business credit cards are deemed “best for business travel with a large introductory bonus and airline fee credit,” or “best for business hotel loyalty rewards,” or “best for flat-rate business rewards with a large sign-up bonus.” There are even credit cards for B2B payments to suppliers that don’t accept B2B payments. In short, “no single card is ideal for every business,” as U.S. News and World Report says on its comparison site.10
Average interest rates vary significantly, depending on such factors as rewards and the business’ credit worthiness. The average annual percentage rate (APR) for business credit cards was 15.37 percent in November 2018, according to ValuePenguin, another comparison site.11
If the selection process seems complicated, managing credit card use is becoming easier, according to U.S. News: “Many of today’s business credit cards come with souped-up reporting and accounting features that make it easy to download detailed reports of all expenses charged using the card.”12 Data can be automatically migrated to business accounting programs.
