The business credit card is a source of financing for companies that have it, being its advantageous use in covering operating expenses in a practical way. A business credit card is a plastic issued by the Bank that allows companies to make payments according to the credit limit obtained.
How does a business credit card work?
They are an instrument that serves to finance the expenses of a company, that is, when using the business credit card, the issuing bank is responsible for paying the merchant the value of the purchase or service and then the bank must be paid the amount in matter, taking into account that certain charges and interests apply according to the plans and terms that apply.
The business credit cards establish an interest which is a percentage applied on the amount of consumption, in other words can be defined as an additional amount for use of credit card.
It should be understood that there is a cut-off date for credit cards, which establishes a period for the consumption of the cards and at which end the consideration of the amount owed is made and on which the corresponding interest will be applied.
In case of canceling the total amount of consumption before the cut-off date, no interest charges are generated, and if payments are made in the period, the amount to be considered for the minimum payment will be less and therefore will generate less interest.
Credit cards establish payment deadlines, in which the relevant contribution must be made, which consists of payments that amortize the debt. Of course there is a minimum payment, which is nothing more than the minimum amount of money that can be amortized per month, which generally represents more interest than amortization to principal.
Calculation of the Minimum Payment of the Business Credit Card
There are two formulas to calculate the minimum payment for credit cards, which are under the decree of the Bank of Mexico , the minimum payment being the highest of the results that these formulas show.
Formula 1: It consists of determining 1.25% of the total amount of the credit line, that is, it is 1.25% of the credit card limit.
Minimum payment = 1.25% (Line of Credit).Formula 2: The minimum payment of the business credit card will be the sum of 1.5% of the amount owed on the cut-off date and the monthly interest on the same amount.
Minimum payment = 1.5% (Debt balance) + Monthly interest% (debit balance)
It is suggested to make contributions higher than the minimum payment, since otherwise higher interest will be paid on consumption and finally the expenses for this concept will rise. Likewise, it is advisable to make payments in a timely manner to avoid additional amounts due to late payment and greater penalties such as card suspension.
