subject: Business Credit Card Vs. Cash [print this page] Using a business credit card can be an effective way to make payments for all kinds of business transactions. At the same time, many businesses prefer to use cash to keep things simple. While there is not necessarily a right or wrong way to pay, there are a few factors to consider when it comes to using credit cards or cash for business expenses.
Cost
One factor to consider when trying to decide between credit cards and cash for business transactions is the cost involved. When a business pays with cash, there are no transaction costs to worry about. The company accepting the cash will not charge any extra fees or surcharges for accepting cash. In some cases, businesses actually provide a cash discount because they do not incur any charges for accepting the payment.
By comparison, using business credit cards sometimes comes with extra costs. The company that accepts the payment has to pay a discount rate to the card company. The company with the card also may have to pay an annual fee or pay interest on the purchase if the debt is left on the card for longer than a month.
Safety
Another aspect to consider is the safety of the transaction. In most cases, using credit cards is much safer than paying with cash. When a company has to pay with cash, the cash could be lost along the way. For example, if a sales representative is taking a business trip and has to take cash to pay for expenses, there's a chance he could lose it during the trip. If the employee instead uses a card, there is much less risk. If the card is lost or stolen on the trip, the card issuer can simply deactivate the lost card and issue a new one right away.
Using a card is also safer because of the small amount of fraud liability. When a card is lost or stolen, the cardholder is only responsible for up to a maximum of $50 in fraudulent charges. By comparison, if cash is stolen, the business isn't going to get it back. The whole amount could be spent in no time.
Record Keeping
One of the advantages of using business credit cards as compared to cash is that it's easier for record keeping purposes. When a transaction takes place on a card, there is always some kind of record attached to it. The business owner can simply pull up his card account online and see the transaction almost immediately. In some cases, receipts can be emailed to the cardholder as soon as a transaction is incurred.
With cash, there may not be any record of a transaction. If the business loses a receipt that is received in exchange for a cash payment, there is probably not going to be any record of that payment. If a receipt is lost from a card, there will still be a record of it on the credit card statement.
Credit cards also make it easy when tax time rolls around. A business owner can simply refer to his card statements to see how much he has spent on business expenses within the last year. At that point, the business owner can file his taxes without having to keep track of receipts or add them up.
