These cards work in much the same way as personal cards. You can use them for purchases and receive a statement from the provider at the end of each billing cycle. Depending on your preference, you will receive a statement in the mail or online showing the total amount outstanding and the minimum you’ll be asked to pay.
Should you settle the bill in full each month, you won’t incur any interest charges, and in an ideal world, this is the best practice. However, if you decide you want to carry a balance, interest will start to accrue from your nominated payment date.
Interest rates can vary dramatically depending on many factors. Although less common, the credit issuing company may assess the creditworthiness of your business only when they offer you the card and then apply a certain interest rate. More common scenario is that you personally guarantee the credit card and the rate offered to you is a direct reflection of your personal creditworthiness. It’s important to consider the interest rate carefully, as if you carry a large outstanding balance month after month, your finance costs will be sizeable by the end of the year.
Some companies may offer you a charge card rather than a credit card. These card providers will ask you to settle the bill in full at the end of each month, and there is no option to carry a balance forward. Because of this, there is no interest rate, and there is typically no credit limit either. This type of card can have certain advantages if you are already established and have some sizable and repeatable monthly expenses. The company may offer you “rewards” based on your spending, with points allocated for each dollar spent. You may be able to redeem your points to make purchases or upgrade plane tickets. However, this card type may not be ideal if you’re just starting out and would rather spread out some costs over time.
