What Does Net Mean in Business Credit Cards?

By John Gugie

  • Overview

    What Does Net Mean in Business Credit Cards?
    What Does Net Mean in Business Credit Cards?
    Credit cards are important to businesses because businesses require a steady flow of supplies and services to use in their daily operations. We will look at what the term "Net" means in terms of business credit cards and why it is important to businesses. First, we will look at exactly what makes business credit cards distinctive.
  • What are Business Credit Cards?

    Business credit cards are similar to personal credit cards in that the owner(s) of the credit cards are offered a line of credit in which the owner, in essence, borrows money to buy products or services and repays the money at a later date, usually within 30 days, or finance and interest charges are incurred on a daily basis. A business credit card affects the credit rating of the business just like a personal credit card effects the owner of the card.
  • Benefits

    Business cards are issued in the name of the company but given to individual personnel. Business credit cards operate in a similar fashion to personal credit card with some differences that offer benefits for individual businesses. These cards offer higher credit limits, lower annual percentage rates, the ability to add varied credit limits to different personnel, the ability to differentiate between personnel accounts for accounting purposes, perks such as frequent flyer miles, purchase protection and other advantages tailored to a business' needs.

  • Small Business and Corporate Credit Cards

    A distinction must be made between small business credit cards and corporate credit cards. Small business credit cards are issued in the name of the principal card holder (usually the owner of the business) while corporate credit cards are issued in the name of the Corporation as an entity unto itself. The owner of the small business credit card is responsible for the payments and a Corporation itself is responsible for the payments but, it is up to the Corporation to enforce its personnel to make the payments on its cards.
  • Credibility

    Business credit cards offer a sense of legitimacy and credibility to the company's customers, creditors and personnel. The cards also help build a company's credit history, which makes creditors more willing to deal with the company.
  • Cash Flow

    Business credit cards help businesses operate by improving their cash flow by allowing businesses to order products and not have to pay for them for 30 or more days depending on the credit card. For those 30 days (or the grace period), the amount borrowed for supplies or merchandise is interest-free for businesses, which allows them to use or sell their purchases and use the money earned to pay back the credit card at the end of the billing period. This is where the term net comes into play. Net simply means the number of days until the amount borrowed with the card (credit) need to be repaid without incurring interest or finance charges. Each business credit card will state the net terms in its contract. The number next to net is the number of days until it is due so, for example, net-30 means that the business has 30 days interest-free until payment becomes due, at which point the business needs to repay their credit card bill in full on those purchases within the 30 days or make their minimum monthly payments and incur interest charges. In a healthy business, the amount of profit made on their purchases far outweighs the interest incurred, so it is a win-win situation for the business.
  • © High Speed Ventures 2011