Is a fleet card right for your small business?

While a business credit card can help you earn rewards while paying for general business expenses, a fleet card lets your drivers buy gas and possibly pay for vehicle repairs. Fleet cards offer special benefits for businesses that need a steady flow of fuel to keep company vehicles on the road.

“Fleet cards can help business owners take control of their gas-related purchases and earn gas discounts at the pump,” says Jordan Tarver, credit analyst for FitSmallBusiness.com.

Pros of fleet cards

Fleet cards offer some benefits that business credit cards lack. For instance, fleet fuel cards allow you to:

Track fuel purchases in detail

Fleet cards offer detailed information about each fuel purchase, including the number of gallons purchased, the vehicle’s odometer reading, the date and time, the total cost and the name of the driver who filled up the tank.

“That’s information that’s all available pretty much in real time or within hours,” says Tom Coffey, senior vice president of sales for Merchants Fleet, a national fleet management company that offers fleet fuel cards.

Most companies offer a web portal where you can check your data. You should also be able to set up text or email notifications to get alerted to purchases based on criteria you set.

Stop fraud with tighter controls

A fleet card may be helpful if you’d like to provide cards to drivers but worry about unauthorized service station purchases, like stocking up on snacks or siphoning off extra gas for a home lawn mower.

Fleet fuel cards provide point-of-sale security and controls, so a business owner can determine ahead of time which charges will be authorized, says Paul Clinton, senior web editor for Automotive Fleet Magazine. For example, a business owner may set the card to allow only gas purchases, and only between 9 a.m. and 5 p.m.

“This was initially referred to as the Twinkie defense, so [fleet owners] could prevent employees from buying food items or charging fuel during nonbusiness hours,” Clinton says.

Monitor the fuel efficiency of your fleet

Another benefit of detailed tracking is that you can find out whether your vehicles are operating at peak fuel efficiency. Because you get the odometer reading each time the tank is filled, you can learn how many miles per gallon each vehicle is getting, Coffey says. And poor gas mileage could tip you off that you need to inflate the tires or put the brakes on bad driving.

Get rewarded for buying a lot of gas

Do you buy 1,000-plus gallons of gas or diesel fuel each month? A fleet card that offers volume discounts on fuel may help you save money for your business. Discounts vary, but fleet cards commonly offer one to five cents off per gallon. Some cards offer tiered programs, meaning the more fuel you buy each month, the more you save.

Cons of fleet cards

However, fleet cards do have some downsides, which is why they can’t entirely replace small business cards. The disadvantages of fleet cards include:

Purchases must be vehicle-related

Fleet cards allow you to purchase fuel from service stations, and some also permit you to pay for other vehicle-related expenses such as maintenance from auto repair shops. But in order to make general business purchases, from conference travel to printer paper to the coffee that fuels your employees, you’ll also need a small business credit card.

Merchant choices may be limited

Depending on the fleet card, you may also be limited as to which merchants you can use. For example, you might be restricted to a specific gas station chain or purchases within a certain geographic area.

Frequent payment might be required

Do you pay the card balance once a month or more frequently? For example,

Some issuers require you to pay your bill once a week or every two weeks, Coffey says. It’s important to know what the payment terms are ahead of time, in case paying the balance more than once a month isn’t feasible.

Fees can add up

Different fleet cards have different fee structures, so it’s important to know the interest rate and any fees. Some cards charge no monthly fee and others waive it if you buy a certain amount of gas per month. However, some cards charge a flat monthly fee, $10 for example, or a fee of $2 or $3 per month per card, which can add up if you have multiple drivers. Given the potentially frequent payment terms, late fees may also become an issue if you occasionally slip on a payment.

When does a fleet card make sense?

Fleet fuel cards can be an excellent tool to help business owners save on gas, manage employee purchases and track vehicle fuel and maintenance. Businesses with two or more vehicles that buy at least 1,000 gallons of gas a month may want to consider a fleet card, says Tarver.

But they’re not for every business, says Cristopher Carillo, cofounder of Allied Payments, which offers credit card processing for merchants. According to Carillo, “For smaller fleets, it may be better to get a cash back credit card with no annual fee and just trust your employees to use it for gas.”

Not sure whether to get a small business credit card or a fleet card? You probably need both. Even if you’re putting enough miles on your business’s vehicles to benefit from a fleet card, since you’ll be limited to vehicle-related purchases, you’ll be best served by  having a business card, too.

Bottom line

If transportation is an essential part of your business and you’re putting a lot of miles on a lot of wheels, then it makes sense to get a fleet card. You’ll get access to valuable metrics on your vehicles, be able to set limits on what drivers can purchase (and when) and  maybe even unlock generous rewards on gas to help your bottom line. But be mindful of the limitations when it comes to merchants, types of purchases, and different fee structures and payment terms.