A Detailed Guide to Choosing & Using a Business Credit Card

Business credit cards work along the same principles as personal credit cards – the card is linked to an account that allows you to make purchases, for which the bank provides credit that you repay at a later date. They also offer a choice of extra features often found on personal credit cards such as membership of rewards programs, balance transfers, insurance policies and other benefits.

The important aspects of business credit cards are that they are only available to cardholders with an Australian Business Number (ABN) and are issued to a company name rather than an individual. They also generally offer a far higher credit limit, but have a larger annual fee. This type of credit card allows entrepreneurs and small business owners to separate business expenses from personal finances, and larger operations can issue credit cards to designated staff under the company name.

These cards are an extremely valuable financial tool for emerging and established companies, and when used wisely they can be a great way of covering expenses, performing business transactions and enjoying extra benefits such as rewards schemes and purchase protection.

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A Quick Q&A to Help When Comparing Business Credit Card Offers

Q: In what ways are business credit cards different to personal credit cards? A: Business credit cards are issued to a named company not an individual, and multiple cards can be provided to members of staff. This means that the responsibilities associated with credit card usage and repayment of the debt are shared within the company, rather than with the individual cardholder. They can have built-in restrictions to limit expenditure, such as only being available for certain types of purchase. The cards issued to staff members can feature individually graded credit limits according to the person’s level within the company and their required expenses. Business credit cards offer special financial tools that help with expense tracking, budgeting, accountancy and taxation. They often also offer extra benefits specifically designed for business owners such as insurance policies and discounts.

In many other ways business credits function identically to personal credit cards, allowing users to make purchases including online and over the telephone, make withdrawals at ATMs and buy foreign currency.

Q: What are the important factors to consider? A: Understanding how credit cards function, what features to examine, along with a clear understanding of your company’s specific financial requirements, are essential in finding the best business credit card for you.

Find a card that suits your business: The card you choose should have a credit limit that covers all the expenses your company requires. If the card features a rewards program, make sure it suits the way you and your staff spend, and offers rewards that can help reduce the cost of your expenditure.

The interest rate and your payment plan: Even if the bank allows you to have a large spending limit, you should still aim to clear the balance each month. The purchase rate applied to your credit card is an essential feature to consider since any ongoing debt on your balance starts to attract this interest. The rate should not be so high that it starts eating into company profits.

The annual fee: Credit cards for businesses usually feature a significantly higher annual fee than other credit cards. This covers all the extra business-specific features, rewards schemes, insurance policies and provides access to larger credit limits and greater spending power. Ensure that the annual fee is affordable and the extras you are paying for are genuinely beneficial to your company.

Look out for introductory offers: Banks often offer introductory offers to new customers, including low purchase rates for an initial period. This can be extremely helpful for new businesses to make essential, one-off purchases, but you should be wary of how the deal changes at the end of the promotional offer. For any promotional deal on interest rates, always ask what the interest rate reverts to? A better choice in the long-term could be a credit card with an ongoing low interest rate.

Make sure your credit history is in order: In order to be successfully approved for a company credit card you need to have a very good credit rating. Once a year you should request a report from a credit checking agency (like Dun & Bradstreet) to make sure everything is in order and there are no mistakes on file. A healthy credit history means the bank is more willing to provide high credit limits, lower variable interest rates and better financial options.

Organise your business finances: There is a great deal of responsibility in owning and using a company credit card. It is important to track expenses, ensure monthly repayments are met, and to monitor account activity if cards multiple cards are issued to members of staff. An accountant can help with keeping your financial records in good order, or if you do your bookkeeping in-house, use a software tool such as Sage, Quicken or Xero.

Q: What about credit limits? A: Credit cards for businesses tend to have higher credit limits for fairly obvious reasons. If you need a card that can handle a lot of purchases in the month, it is best to check the minimum and maximum credit limits on the bank’s online application page before filing your application. These details are also available on our site.

Q: Are there specific business features that can speed up tax time? A: The ability to track your transactions is the major advantage. You can replace hours spent tracking down purchases into a spreadsheet with your exported monthly statement. Some cards that are purely aimed at businesses also allow you to export your purchases into popular accounting software such as MYOB. However, this transaction tracking feature can be found elsewhere these days in the form of online cloud-based accounting software like Xero or inDinero.

Q: Is there anything I should be aware of when comparing offers? A: Because of the nature of the usage and the gold standard features that come with a credit card for business, you can expect the annual fee, interest on purchases and cash advance rate to be higher than average. However, if you’re managing your spending and making repayments on time and in full, then the higher interest rates shouldn’t matter. However, failure to manage your account will result in you paying interest that will reduce profitability.

Q: What do I need to apply? A: As with all credit cards, you need to be over 18 years of age, be resident or citizen of Australia, have a good credit history and earn above a certain annual income threshold, which varies between different credit cards. You also need to provide evidence of your financial records and ABN Number. Once you have selected the company credit card you want to apply for, check that you meet the bank’s minimum requirements, before commencing the online application process.