Business Credit Cards

• Varying card issuers: Just as with personal cards, a business card can be a Visa, Mastercard, American Express or Diners Club card. However, American Express has the largest choice of business cards in Australia.
• Varying card features: Features such as rewards and frequent flyer points, sign-up bonus points, complimentary insurance, other travel benefits, and even low interest rates, are all available with business cards. However, business cards with low annual fees may have few or none of these features.
• Credit card or charge card: A business card may be a credit card, with a fixed credit limit and the option to defer payment and pay interest, or a charge card with no set credit limit and the strict requirement for full timely payment of the account balance each month.

In many ways, business cards 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.

However, business cards are issued to a business with an Australian Business Number (ABN), not to an individual, although a business with an ABN may in fact be operated by a sole trader or partnership rather than being incorporated.

Regardless of the business size, multiple cards on the one account can be provided to members of staff. Equally, a sole trader may need just one card.

Depending on your business structure, the card provider will require a specific liability arrangement:

• Individual liability for a sole trader: The sole trader is personally responsible for repayment of the debt, including any debt incurred on supplementary cards issued to employees.
• Joint and several liability for a partnership: The business partners are jointly responsible for the debt, but each of them could also be held responsible for the total debt.
• Corporate liability: For an incorporated business, the card account is usually held in the name of the company. The company has liability for the debt.

Where cards are issued to the employees of a business, it is normal for each card to be assigned a fixed limit which will usually be much lower than the global account limit. E.g. total account limit $50,000, with cards issued to ten employees with limits of $5,000 each (or varying limits, but still with a total of $50,000).

It is also possible to limit the kind of expenditure permitted. E.g. a procurement officer may only be allowed to purchase business stock or equipment from certain suppliers, but not use the card for travel and entertainment.

Most business cards cards offer special financial tools to help with expense tracking, budgeting, accounting and taxation. Online access means that most transactions will be visible shortly after they are made. And each card’s monthly transactions are itemised in detail in the monthly statement, as well as being reported in total.

The ability to track transactions is a major advantage of a business credit card, replacing hours otherwise spent tracking down transactions. Data can usually be exported from your online card account into a spreadsheet or into accounting software such as MYOB and QuickBooks.

It is essential to understand the features available, and how to match them with the specific financial requirements of your business. This will enable you to find the card that is right for your circumstances. Make sure that you check the following:

• Available credit limit: The card you choose should have a credit limit that could cover all the monthly expenses of your business if necessary.
• Interest rate: Even if the bank allows you to have a large spending limit, you should still aim to clear the balance each month. However, the purchase rate applied to your credit card is still an essential feature to consider, since any ongoing debt incurs this interest rate. Your cash flow’s ups and downs may see you needing to use your line of credit from time to time.
• Expense tracking functionality: Look for monthly statements listing each supplementary card’s expenditure in detail and in total, and the ability to export data to a spreadsheet or your accounting software for extra reporting flexibility and time-saving.
• Rewards program: 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 business costs. As a rule of thumb, ensure that the value of the benefits likely to be derived from the rewards program each year is at least equivalent to the annual fee.
• Sign-up bonus: If there are significant sign-up rewards or frequent flyer points on offer, there may be a possibility for a sizeable one-off reduction in your expenses. E.g. the bonus points may be enough for several free business flights.
• Complimentary benefits: Built-in free travel insurance for cardholders could provide serious cost savings for your business. (Read the insurance product disclosure statement , however, to make sure that the cover is sufficient for your needs.) Some business cards may offer a free domestic flight annually, or airport lounge access. It all adds up to either reduced expenses or a better experience for your employees.
• Introductory offers: Look out for introductory offers. Banks may offer introductory rates to new customers, such as low purchase interest rates for an initial period. This can be helpful for new businesses to make essential purchases, but you should be wary of how the deal changes at the end of the promotional period. Always check the revert interest rate and the offer expiry date. It may be that a card with a higher initial rate is better, because its ongoing, long-term rate may be lower.
• Annual fee: Credit cards for businesses often have a higher annual fee than personal credit cards. This fee covers all the extra business-specific features, rewards schemes, insurance policies and other benefits, and provides access to larger credit limits and greater spending power. Ensure that the annual fee is affordable and that the extras you are paying for are genuinely beneficial to your business.

Make sure your credit history is in order. To be successfully approved for a business credit card, you need to have a very good credit rating. Once a year you should request a report from a credit checking agency (such as Dun & Bradstreet) to make sure everything is in order and there are no mistakes on file. A healthy credit history means the bank will be more willing to provide a higher credit limit, a lower variable interest rate and better financial options.

For an individual or joint and several liability card, you need to be over 18 years of age, be a resident or citizen of Australia, have a good credit history and earn above a certain annual income threshold, which varies from card to card. You also need to provide your financial records and ABN number.