Credit card issuers making big moves to lure small-business users
By Jay MacDonald • Bankrate.com

Is your small-business waistline feeling a little raw from all the belt tightening lately? Maybe a business credit card can offer some relief while the economy gets its second wind.

The three major credit card companies have been feeling your pain and continue to load enhancements and rewards onto corporate cards. The goal: Attract business customers who have shunned corporate cards in favor of the personal plastic already in their pockets.

You're not still doing that, are you? If you are, you may be missing out on the considerable savings that today's sleeker, simpler small-business cards offer.

Today, an inexpensive small-business credit card unlocks a treasure trove of financial perks previously available only to major corporations. From 24-hour travel agents to deeply discounted overnight shipping to professional services, a corporate card can save you time and money like never before.

Getting to know you
Not so long ago, the financial community viewed small business as having roughly the prospects of a Shetland pony in the Kentucky Derby. That's changed. Now, the message to small companies is that the banks and card issuers really want your business.

"Issuers are finding that the small-business customer is still buried in their consumer portfolios," says Craig Card, vice president for small business products and services for Visa. "Because small businesses have a different need than consumers and are more apt to retain a relationship, card issuers view them as a really important market."

Why? The consumer-card market is saturated, and small business represents the growing and increasingly prosperous segment of the new economy. So issuers' arms are open, even if the welcome is still a little awkward.

"It's been an uphill battle for the past several years," Card admits. "I think we are finally getting through to the issuers to where they understand small business, they know that it's different than consumer.

"The nice thing is, issuers are taking an interest so they want to know more about this segment: who they are, what they want, how they work, how they should be serviced."

Information overload can backfire
Technology, and most importantly the Internet, has made it possible for the card associations to pick and choose from existing consumer and corporate-card products and platforms to design small business cards that meet your needs. All now offer online account access and reports you can tailor to your business.

That has created problems of its own, according to Jim Gorman, executive director of business cards for Chase.

"The majority of the problems with small businesses is they really don't understand it and they get overwhelmed with data," he says. "It becomes data vs. true information.

"That's changing as we get better, and they get better in terms of getting exposed to it," adds Gorman. "You'll see data become something for the small businesses that will just be an astronomical help to them in managing their business."

Steve Harrison, vice president of marketing and product development for MasterCard corporate payment solutions, agrees that the needs of small business are unique.

"What we've found in the research is they are intensely time-strained, and their business life is much more intertwined with their family life than somebody who works for a large corporation," Harrison says.

"The messages we hear loud and clear are 'simplicity,' 'flexibility,' and 'Nobody knows my business and my needs better than I do.'"

It may be tough to design card programs around that, but they're trying.

Rerouting air miles
If you had to choose the one reward program that has lured more cardholders to credit than any other, it would be airline miles. Little wonder that the business card offerings not only feature airline miles, but also have lowered the bar across the board: $1 spent equals one point, no expiration, no blackout dates.

That's a pretty good deal if you're going to charge a lot. But this year, business card positioning has been all about niches, where to find them and how to please them. And one of those niches doesn't necessarily want the miles.

"Air miles are still the No. 1 resonating message on rewards programs," Harrison admits. "But there are niches in the population that either don't travel, have traveled so much that they don't need any more air miles, or simply want the flexibility to redeem their points at a level below the typical 25,000 miles. A lot of our issuers will give the amount at 10,000 or 15,000."

Heck, the Chase Business MasterCard even starts redemption as low as 7,500 points.

Bonus cards sweeten the small-business pot
For those who don't want to use charge points for air travel, other reward options are appearing. MasterCard launched its Business Bonus program to sweeten the pot for small businesses that want simpler, more flexible ways to redeem their points.

Beginning at a level set individually by the card issuers (usually 10,000 points), MasterCard users can elect to cash out with a bonus card that is mailed to them. The stored-value card is good anywhere MasterCard is accepted, but if you lose it, you lose the bucks.

"It's a prepaid card that allows the business person to recycle the rewards back to their business to buy office supplies or to buy things for their families or go on a vacation," Harrison says.

The brands are also loading on the strategic partners to help save you money on supplies, travel and entertainment, even professional services. In the near future, expect to see a broader selection of alliances, including human resources, temporary help, public relations and marketing.

You may not be tempted by 10 percent off your copy paper alone, but their hope is that the combination of a dozen discounts will get your attention.

"It's really getting into a tailoring to specific niches," says Gorman. "Things are getting very niche now and very specific."

Breaking the checkbook habit
The ongoing challenge facing business cards continues to be breaking companies' cash and checkbook habit. Visa and MasterCard both offer business credit, debit and line-of-credit programs that, when used together, the issuers hope will make cash operating funds obsolete.

"These three products as the core suite really complement each other," says Card.

"Small businesses will use their credit card as a T&E for travel, their check card as a check and cash replacement vehicle, and the line-of-credit product for working capital or to buy inventory or other large purchases," he says. "They are each different and have their own plastic. An issuer can offer combined statements that roll up all three products."

Card issuers also have made it quick and easy to add and delete employee cards. MasterCard's Master Coverage program even offers a safety net of $5,000 for up to five cards ($10,000 for more than five) in case an employee goes on an unauthorized spending spree.

And Harrison says the business debit card offers other advantages.

"For some businesses, it's almost a transition step from using a checkbook," he says. "One, they may not have been in business long enough to get the credit line that they need. And some want to see the transaction on their checking account because they've always seen that."

Getting a business card into your hands is only the first step. What the incentives are really designed to do is to get you so eager to earn points that you'll use the card to pay your suppliers and vendors.

"That's the sweet spot that we hope to capture with our small-business card," says Harrison. "Our rewards program acts as a catalyst or an incentive to do that. If you're a retail store and you need to buy a $2,000 cash register, you put it on your small-business card; there's no reason to write a check for it anymore.

"One, it captures that expense electronically. Second, you can earn reward points on it. Third, you can buy over the Internet much more easily. And the product warranty is doubled with certain provisions. Businesses are seeing the light. It is much more effective."

Jay MacDonald is a contributing editor based in Florida.

-- Posted: Sept. 28, 2001