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How to use credit cards to simplify finances

It can go beyond payment for purchases.
By Entrepreneur Staff |

Credit cards are a convenient medium of payment for purchasing goods or services. Instead of asking for cash, merchants accept credit cards as payment and the purchaser pays the credit card company at the end of a regular monthly billing period, allowing the cardholder to better manage his or her money.

The advantages of credit cards have not been lost on Filipinos, with the Philippines seeing steady growth in credit card usage. According to industry website www.creditcards.com, there are approximately 6 million to 7 million credit cards in the Philippines today, growing 32 percent from 2003 to 2008.

This has led to more banks offering credit cards as well as increased competition in those offerings with lots of promotions ranging from loyalty points to store discounts. Some banks have also started offering corporate credit cards, which confer several advantages for entrepreneurs who are considering using them for their business.

BPI, one of the Philippines’ leading banks with over 820 branches nationwide, first started offering corporate cards to clients in 1996 and counts some of the leading multinationals in the country as their clients. According to Nadette L. Chua, Corporate Markets Head for BPI’s Credit Card Marketing and Sales Department, “BPI offers Corporate Cards that can be used by small businesses as a tool for managing cash flow and facilitating payments, providing them with credit and working capital for better cash management. It also provides status and recognition to the business as the name of the company is embossed below that of the assigned cardholder.”

Corporate credit cards are issued to the employees of a business, whether a sole proprietorship, partnership or corporation. Unlike personal credit cards, liability for payment of the credit card falls with the business instead of the cardholder. This means that the credit limit of a corporate credit card, which is the maximum value of purchases possible using the credit card, is based on the bank’s evaluation of the business and not of the person named on the card. Thus a corporate card can support a much larger credit limit than a personal credit card, making it useful for more and larger purchases, including big-ticket items like machinery or equipment for your business.

Such purchasing power can be useful for the business, offering it additional savings through the loyalty points generated by large purchases. “The company can redeem the loyalty points earned from corporate cards whereas if personal cards are used, the employees get the points. These loyalty points can be used to waive annual fees or to redeem items to be raffled off during company’s Christmas party or gift certificates to be used as employee incentives.”

Another benefit from a corporate card is allowing a business to stretch its cash. Depending on the date of a purchase and the corporate card’s cutoff date, a business has 20 to 50 days to pay the bank for its purchases. This means the business will have much more cash on hand for other purposes such as increased inventories, which can help generate more profit for the business.

Corporate cards also offer a centralized way to monitor and account for employee expenses.  “Coursing expenses through the corporate card will provide the company with a complete accounting of employee spending. You can even break it down per cardholder, department, group, project, etc.” says Chua.

BPI’s credit card platform for businesses also has some enhanced features that entrepreneurs can make use of. As Chua explains, “expenses can be validated online the very next day and can be integrated with the company’s accounting system through Express Data Online (EDOL), a comprehensive Internet-based reporting and expense management solution available to BPI’s corporate card clients.”

As more and more firms accept credit cards for payment, entrepreneurs should explore getting corporate cards for their businesses and take advantage of the many benefits it offers them.

This article was originally published in the November 2009 issue of Entrepreneur Philippines.

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