Dedicated business credit cards offer many tools personal credit cards don’t have. They can save you money, help track expenses and simplify taxes.
Businesses of all sizes – from a sole trader to a company employing a large staff – can derive benefit from a dedicated business credit card. Besides offering many tools that personal credit cards just don’t have, they provide an opportunity for both business owners and employees to keep business and personal expenses completely separate.
You can apply for a business card if your business has an Australian Business Number (ABN).
Credit card or charge card?
Cards for business use come in two flavours: credit cards and charge cards.
A business credit card, much like a personal credit card, has a definite credit limit as well as the option to defer payment of some of the purchase balance beyond the due date. Interest charges are incurred, but the available line of credit can prove very useful.
Business charge cards, on the other hand, do not have a fixed credit limit (although the credit provided is not limitless) and you will be expected to clear the balance in full on or before the due date. The lack of a fixed limit offers extra flexibility for a business with seasonal or unpredictable purchasing spikes, but there is no option to postpone payment and pay interest.
Individual, joint and several, or corporate liability?
If you run a business and have an ABN but your business is not incorporated, you will be personally responsible for all transactions on your business card. You will have liability as an individual for the debt incurred by all primary and supplementary cards on the account.
Partnerships may be able to choose a joint and several liability business card. This means that although all partners have agreed to be jointly responsible for the debt, in the event of a payment default the bank could, if it chose, pursue any single partner for the entire debt.
Larger corporations will be most likely to opt for corporate liability cards. In this case the company is the entity responsible for the debt. Sizeable organisations may be better served by a corporate credit card account, with the possibility of issuing multiple cards on a single account to a larger number of employees.
Larger credit limits
Business credit cards tend to have larger credit limits than personal ones, for obvious reasons. The expenses of a business are usually far larger than those of an individual or family. This means that you will need to have a very good credit history (for a business card with individual or joint and several liability), or that your business will need to demonstrate a history of both profitable operation (probably via tax returns) and timely payment to its creditors.
As well as a global credit limit for the account, it is possible to set individual limits for supplementary cards issued to employees.
Expense tracking and data exporting
One of the most useful features of most business card accounts is a superior expense tracking and reporting capability. Business expenses are now already separate from personal ones (for the sole trader), but additional tracking tools are available on most types of business cards. Expenses for each card in each month can be listed in detail and in total, and the data can usually be exported to a spreadsheet or directly into your accounting software. For small businesses in particular, this can save hours or work at tax time.
Rewards and complimentary benefits
Business cards often come with the same kinds of rewards and benefits attached to personal credit cards: rewards points, frequent flyer points, complimentary travel insurance, airport lounge access and even free flights. These benefits can deliver real savings for your business. Rewards points can be exchanged for office equipment or employee incentive gifts, for example. If you or your employees travel frequently, frequent flyer points, travel insurance, lounge access or free flights will all reduce your business expenses.
Some cards offer travel insurance specifically tailored to business needs, including card account balance waiver or expenses for business trip completion by an alternative employee, in specified emergency circumstances.
Fees and charges
Business cards on the whole have fairly high annual fees and interest rates, reflecting the additional benefits they often provide. However, just as with personal cards, it is possible to find a business credit card with introductory offers such as temporary lower interest rates (or even permanent lower rates), reduced or waived annual fees in the first year, and sign-up bonus points.
If you expect to issue a large number of cards to employees, you will need to check the annual fee for additional cards. This could be anything from zero to $100 or more per card.
Other fees to take into account are foreign transaction fees, late payment fees and over limit fees. Fortunately, if the card is used solely for business expenses, all fees, including the annual fee, should be tax deductible.
Compare the business cards on this page to find one that is suitable for the size, structure, number of supplementary cards required and spending pattern of your business.
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:
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:
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.