A question about credit cards...

[AndyC_123]

Hi

This is going to sound like a stupid question to some (apologies), but I've never had anything to do with credit cards.

I run a business and we are offered a lot of credit cards with 1% cash back. We spend £800k-£1m on bills a month, so this could amount to a fair whack. Of course not everyone will take a card payment and others might charge for it, so will continue to bank transfer where required.

Does a credit card link to your existing account or is it a new bank account?

If I spend £1000 on the credit card, it will be a negative amount and then a payment will need to be made from somewhere to cover that? Does that happen automatically?

Is this a st idea?

Cheers

[JayRidesBikes]

I have an American Express business rewards card. It's a separate account, we get rewards for spend and just set up a direct debit to pay the balance off monthly. We use it mostly for stock / supplies purchases which I'm buying anyway.

As long as you are on top of cash flow and aren't using the card to extend your credit, it's nice to earn rewards for money you'd be spending anyway.

[Countdown]

AndyC_123 said:

Hi

This is going to sound like a stupid question to some (apologies), but I've never had anything to do with credit cards.

I run a business and we are offered a lot of credit cards with 1% cash back. We spend £800k-£1m on bills a month, so this could amount to a fair whack. Of course not everyone will take a card payment and others might charge for it, so will continue to bank transfer where required.

Does a credit card link to your existing account or is it a new bank account?

If I spend £1000 on the credit card, it will be a negative amount and then a payment will need to be made from somewhere to cover that? Does that happen automatically?

Is this a st idea?

Cheers

1. The CC "account" is a completely separate account.

2. You'll get billed monthly. You can set it up so a DD is taken automatically from your normal bank account. Alternatively some businesses use them as expensive short term borrowing.

3. It's not necessarily a st idea. It depends on why you want to do it. Having A CC gives you additional working capital and (if you use the interest free period only) it can be cheap borrowing. However you need to make sure you pay off the balance on time.

[Insurancejon]

For that level of spend I’d go Amex platinum charge card. 56 days credit .

Points build up will pay for many holidays or turned to useful vouchers/spend on Amazon etc

[Insurancejon]

For that level of spend I’d go Amex platinum charge card. 56 days credit .

Points build up will pay for many holidays or turned to useful vouchers/spend on Amazon etc

[AB]

100% American Express rewards. Paid off each month by DD.

We also use AMEX FX for our overseas payments. Can also use it to receive money.

Had over 3m points this year. They come in handy! Not everyone takes it but you can have your account manager call any suppliers that don't to try and encourage them. Luckily a fair few of ours do and combined with all hotels and the FX stuff, it works brilliantly.

My personal card use is the same and the accounts are linked so... I keep quiet about that.

[Simpo Two]

AndyC_123 said:

Does a credit card link to your existing account or is it a new bank account?

If I spend £1000 on the credit card, it will be a negative amount and then a payment will need to be made from somewhere to cover that? Does that happen automatically

A debit card links to your bank account; it's issued by your bank and is effectively an instant plastic cheque.

A credit card is separate. You run up a bill on the credit card account, then pay it from your bank account. The best way to do this is to set up a DD so it's paid automatically on time and in full every month. You really don't want to cop interest on £1M!

[AndyC_123]

Very helpful, thank you everyone.

The reward points from Amex - it's possible to get decent stuff? It's not like a carnival where you'll get a million tokens that wins you a pencil eraser?

There's a few places offering 1% cashback - presume the rewards are a better option as become personal and tax free?

If you hit the credit limit on a card, can an amount be paid off easily enough before it's due?

Thanks

[AB]

If you're putting 500k a month on an AMEX reward card then you'll never pay for another flight.

Yes balance can be paid off mid-month.

If you decide to go for it, let me know and I'll 'introduce' you - we both get a bonus.

Edit: technically they should probably be declared as BIK... but...

[AndyC_123]

Never really fly anywhere or spend anything that's the problem

[Wombat3]

We don't accept AMEx . They are tts to deal with, their accounting is a nightmare and they charge a fortune.

If you want better relationships with and better pricing from your suppliers then make yourself easy and cheap to deal with., not more expensive.

All CC "rewards" have to be paid for from somewhere and it's not the card companies that pay them.

[mikey_b]

This will give you an idea of where/how you can spend them:

https://www.americanexpress.com/en-gb/rewards/memb...

[Panamax]

AndyC_123 said:

I run a business and we are offered a lot of credit cards with 1% cash back. We spend £800k-£1m on bills a month, so this could amount to a fair whack.

Is this a st idea?

At those amounts you'd surely do much better than 1% by negotiating discounts with your suppliers and paying by bank transfer or DD.

[AndyC_123]

Hi

So thought I would update this as it might be of interest to some.

Got an American Express gold business card late September/early October. Bit of a faff getting it sorted with credit limit etc but got there in the end.

Majority of our suppliers don't take any card payments (all bank transfers), but those that do, only about half take Amex. Probably 5 or 6 in total.

Still spend a bit with them, so up to about 100,000 points. But I don't think the points are worth as much as the 1% cashback that other cards offer - I calculate the value as about 0.5%? Combined with the fact that less people take Amex than other cards, I wonder if it's worth it.

[Simpo Two]

AndyC_123 said:

Still spend a bit with them, so up to about 100,000 points. But I don't think the points are worth as much as the 1% cashback that other cards offer - I calculate the value as about 0.5%? Combined with the fact that less people take Amex than other cards, I wonder if it's worth it.

I'd agree. Points are useless unless you want something you can get with them.

Open a different CC account and take the 1% cashback. But even then I suspect there are strings attached.

If there's an ordinary (ie non-business) CC provider who gives 1% cashback on everything with no strings attached, like in the old days, please let me know