More than just plastic for purchases, credit cards can be a powerful tool for micro, small,and medium enterprises (MSMEs) to gain ready access to funds and manage their finances.
However, there is still a need to raise awareness on the use of credit cards for business, according to the Credit Card Association of the Philippines (CCAP).
“We know that MSME owners often mix their personal and business finances. They use their personal credit cards to pay for bills or purchases related to their business, enabling them to manage tight cashflowsituations. Credit cards can be more than that,” said CCAP executive director Alex Ilagan.
He said credit cards can serve as available credit line for MSMEs looking for a convenient source of working capital without the need to formally apply for a business loan “which can be a tedious process and may even require putting up collateral that they do not have.”
MSMEs can also use credit cards to pay for things they need to seamlessly run their business, such as purchasing equipment and supplies and paying for utility bills, among others.
Some CCAP member companies issue special types of credit cards for MSME needs such as Purchasing or Procurement Card, Distribution Card, Corporate Card for Travel and Entertainment, and Fleet Card for fuel credit.
Based on CCAP’s quarterly survey of its members comprising the 17 major credit card issuers in the country, there are a total of 11.8 millioncredit cards issued in the Philippines as of the first quarter of 2023.
Of the total, 65 percent are considered as “transactors” who pay their totaloutstanding balance in full every month while only 35 percent are “revolvers” who payonly the minimum amount or any amount less than the full outstanding balance, CCAP said, citing available data from the Bangko Sentral ng Pilipinas (BSP).
Ilagan said MSMEs must know the billing cycle for proper money management.
“There is a 30-day monthly billing cycle and 21-daypayment grace period provided by credit card issuers so MSMEs can enjoy interest-free credit for up to 51 days fromthe date of transaction. Best to use your card just right after the billing cut-off date indicated in the billing statement because it will allow you to enjoy the longest interest free credit float,” he advised.
In addition, CCAP shares these five tips so MSMEs can take full advantage of their credit card:
When it comes to credit card management, the saying, “Do not mix business with pleasure,” is always true. Use a separate business credit card so you can keep your business and personal finances completely separate.
Aside from the convenience, you can use your credit card for reward points or even cash rebates, which can translate to savings for your small business.
You do not have to dip into your bank account every time there are contingency funds needed, equipment purchases, accounts payable, and more.You can conveniently pay for various costswithout using cash or issuing a check.
