Wait! What Credit Limit?!

Over the last several weeks we've been hearing more about abrupt changes to credit lines on business credit cards. Since last Fall, conversation in the press has circled around the effect the credit crunch is having on consumer credit card accounts relative to purchasing power and commercial loans but now it is affecting business credit card accounts too. Companies are finding it difficult to conduct normal daily spending activity and they are unpleasantly surprised when cards suddenly stop working mid-month without warning. Companies in most industries are being hit hard by bank tightening. When credit limits are suddenly imposed or lowered without advanced notice, reaching newly imposed limits is problematic because all cards are blocked from further use until the bill is paid.

This is disruptive especially for companies with employees that are in the field spending ad hoc for supplies, fuel and other business expenses. New credit limits reported are lower than what companies spend monthly irregardless of clean credit and payment history. If limits are lower than the amounts companies need to operate at a bare minimum, credit cards will quickly lose their value as an effective payment tool in business. The card industry has proven to us that card spending is more efficient, can minimize risks of managing cash and can streamline check or cash operations through simple distribution, especially compared with cash and checks.

Companies are being forced to look for alternatives and they are finding the PEX Card Service. We designed the service to put businesses back in control of their cards. Using our administrative web site, corporate admins can view employee spending in aggregate, and can determine when, where and how employees use company cards. Each prepaid debit card has an adjustable balance for budgeting, individualized spending and funding rules for control, and reporting of up to the minute transactions for transparency and immediate cash position. Companies account for this as a cash account, appearing as an asset on the books, not as a liability. Funds in the account are prepaid, so credit limits are self managed. Funds can be transferred electronically to and from company checking accounts for maximum flexibility.

As conditions force change in the way business is conducted, it is good having access to tools that fit the times. Even though credit might be tight, companies can still benefit from using cards to keep their books straight, keep employees on budget, lower bookkeeping costs and maximize any access early payment benefits vendors may offer for paying with plastic.