Understand the basics of a business credit card and how it can benefit a business owner. Find out what to look for and how to use one so that you get the most from it.
- Business credit cards work on the same principle as personal credit cards, allowing the cardholder to purchase goods or services physically at a merchant location, or remotely over the telephone or via the Internet.
- To receive the benefits of switching to a business-specific credit card, you will need an Australian Business Number (ABN). You can apply for one of these online from the appropriate government website.
- Business credit cards have advantages for business owners such as tax deductions on spending and prestige benefits only available for those with an ABN (Australian Business Number). However, many business owners simply choose to apply for a frequent flyer credit card to maximise their points earning potential. A low interest credit card may also be suitable. If your company has an annual turnover of $2 million then a corporate credit card may work for you.
- These form of company credit cards generally require the card owner or company to be in a good credit standing.
Business Credit Card & Charge Card Comparison
Table of Contents: Guide to Business Credit Cards
Five Important Things To Know About Small Business Credit Cards
If you have been thinking about getting a small business credit card, and have some questions about them, you can read this article to get more information. When used correctly, these cards could really help you get your business started properly.
Credit cards for small businesses can really help get a business started and up on its feet. They have been designed with special features to help out smaller owners that just need a little bit of extra financial help getting started.
Here are five of the most important things you should know about small business credit cards so that you can get the most benefits out of them.
- Know what options you have for your payment plan - You should know ahead of time what your minimum monthly payment will be so consult the terms and conditions of the credit card first. Fortunately, most of these credit cards have low interest rates so you can carry the debt a little longer if need be. Many of these cards also come with additional benefits, and you can find out more of these by reading the fine print as well.
- Pick the card that suits your business the best - New entrepreneurs are usually facing financial risks when they first start with a new business. These cards are designed to meet these needs. You will be able to figure out which card is best for you by determining where you can get other money, how you will be able to pay the balance off every month and examining your business’ monthly expenses.
- Your credit score is important - You will have better access to loans if your credit rating is good. You will also have more financial options available to you, such as the ability to open new accounts for credit cards.
- Be wary of introductory offers - If the small business credit cards you are considering offer low interest rates, but only for a short period of time, then you should be aware that once this time period has ended you will have to start paying the standard interest rate. If this revert rate is high, this may be detrimental to your business, and you may want to look instead at other credit cards that offer long-term low interest rates.
- Organisation counts - Most small business owners have a separate account for their business and personal use. This makes it easier to keep track of money in and money out, and makes finances more easily organised. It also helps if you have an accountant that is keeping track of your business books.
Credit cards for small businesses can really help a business that is first starting out, but they can also be quite damaging if they are not used correctly. Make sure you understand everything about your card before making an application so that you can get all of the benefits from it.
How to find the best business credit card
The bank you choose to do your business banking with may also be able to offer you a credit card for your business This may be the same bank you have banked with as a personal customer for many years, and as your business has developed it just seemed natural to open your business account in the same place. Whilst this may seem the easiest option, it may not always be the best for your business. Even if you don’t choose to take your business elsewhere, there is certainly no harm in checking out what else is available on the market and comparing your options. Armed with the facts, you can always go to your own bank and haggle with them over what they are prepared to offer on their card, compared to what you know is being offered on the other cards. Most banks are happy to talk terms and conditions if it means they retain your business.
Within the various offerings you may discover, there will be two main types of credit cards designed for business use:
- Credit card
This is what you would probably expect a business credit card to be, and it operates as your average personal credit card does. You build up a balance over the month and your statement then requires that you pay off a minimum amount at the end of the month. Whatever you don’t pay off is charged at a predetermined rate of interest. This is the better option for businesses that need flexibility due to ebbs and flows in cash reserves, where it may not be financially possible to clear the balance in full each month.
- Charge card
Essentially, these provide a short-term (monthly) loan to a business on any purchases they charge on the card, as they require the full amount to be completely paid off each month to avoid the imposition of hefty fees. These cards are better suited to companies that are financially stable enough to always be able to clear their balance. American Express and Diners Club are some of the best-known of the charge cards.
Types of Business Credit Cards
- Frequent Flyer Points and using your card for business - find out which cards allow you to earn frequent flyer points on your business purchases and expenses.
- Get rewards with business purchases
- Charge Cards
Advantages of a business credit card
There are a lot of benefits associated with small business cards for both new and established companies. Here are some of the main reasons why you may want to look at getting a credit card for your company.
- Convenience - They also provide the opportunity to make instant approved purchases in person, online or over the telephone. You’ll have more convenience when you have a credit card for business purchases since you will be able to place orders by phone or on the Internet. You can get extra cards for employees that are going to be making purchases and you don’t have to worry about writing checks or having large cash amounts available in the office.
- Business relevance - Issuing credit cards is also usually cheaper than writing a cheque, which in this day and age looks positively antiquated and does not provide the instant assurance that the payment has been approved.
- Managing expenses - These business cards allow for a separation of personal and business expenses, which makes things far easier for tax purposes and to keep track of business expenditure. If you’re a business owner, you’ll probably already understand the necessity of keeping accurate financial records. Many smaller businesses tend to have a single account for both personal and business use, which can make for a nightmare at tax time separating the two out. Credit cards that are specifically for business purchases can give you the ability to separate out your personal spending from your business spending, which means your accountant won’t need to spend so many billable hours sorting through your paperwork.
- Employee cards - Selected employees can be issued with their own card on the account, empowering them to make necessary business purchases, and to charge other business expenses to the card. Employee cards can have separate credit limits and controls placed on them, in accordance with the position of the individual within the company. This can help control employee expenses and allow you to monitor the spending patterns of your staff.
- Improving credit rating - These cards also serve the hugely important purpose of building up your business credit rating.
- Interest free days - If you shop around, you may find it’s possible to benefit from up to 45 days interest-free on some credit card accounts. This can mean paying creditors using your card at the beginning of the month and paying off your balance at the end of the month when your accounts are received. This can help improve business cash flow by offering short term credit when you need it, and it keeps your creditors happy at the same time.
- Rewards benefits - If you use your card regularly, or if you have additional cardholders all using the account for expenses, it’s easy to accumulate rewards points very quickly. If your card offers a rewards program, it’s possible to benefit from some great rewards. For example, if you need to travel as part of your business, you might convert some of your points to Frequent Flyer miles, or you might reward employees with gift cards or other rewards.
- Complimentary Insurances - If the credit card includes insurance then you can benefit from this as it will save you from having to take out separate cover. Plus these cards also help separate business from pleasure quite easily and are often cheaper to run than issuing cheques.
- Higher credit limits - Credit cards for business spending often give a higher credit limit than personal cards, which makes them ideal for a company that has high business expenses.
When you are applying for or comparing a credit card that is meant for business purposes, look at the interest and fees on the card and find out if there is a rewards program on it. Ensure you do a comparison of your credit card options online to find one with the best features with a low rate if you have a lot of business expenses and pick the best card suitable for your business.
How to compare your business credit card options
As businesses will be likely to make a wide range of purchases, including foreign imports, credit card acceptance plays a large factor in credit card comparison. On the surface, the Business Accelerator card has more generous and appealing features, yet American Express cards have limited acceptance within Australia in relation to Visa and MasterCard.
When comparing business rewards however, the AMEX ‘Membership Rewards’ program is arguably the most competitive rewards program available to Australia consumers.Back to top
Business credit card fees & charges
In 2002 there were many changes made to the credit card system in Australia, in a bid by the Reserve Bank of Australia to improve the efficiency of card services. One of the major changes that took place, and the one having the biggest effect on consumers, was the reform to the charging of credit card fees.
It isn’t news that businesses have to pay an extra fee whenever a customer pays for something using their credit card. However, under the old rules, companies were not allowed to pass on these charges to their customers. What some businesses did in order to recoup some of these costs was to do it in a less direct fashion, for example charging a higher price for their goods or services.
However at the very beginning of 2003 this rule was changed, and the restriction on businesses was lifted.
Now business owners are able to pass on the fee they have to pay to their customers directly, and some do, however some still choose to recoup the charge by having slightly higher prices.
Further reforms were introduced in 2013 after customers began complaining of unfair credit card surcharges by some retailers. Now, retailers are only able to charge customers for the ‘reasonable cost’ of accepting a credit card payment.
The customer also has a choice. They can pay the extra fee by paying for goods on their credit card, or they can avoid paying the added credit card fees, by paying for the goods in cash.
Although businesses are now allowed to charge the consumer for these added fees, they also have some obligations when adding these charges.Back to top
Business or Personal credit cards, which one is for you?
These are the main differences you can expect to find between credit cards for business and personal credit cards:
- Business credit cards are issued to the company not to an individual. In this way, the company named on the card is responsible for any debts that accrue on it, rather than the individual who has it in their possession and uses it for business purchases.
- These cards may have restrictions on them, aside from any credit limit that may apply to the card. This may mean that they can only be used for certain purchases, or perhaps that cash withdrawals from ATMs are not allowed.
- A number of cards can be issued on the business account, and the credit limits and restrictions on each one can be geared to the individual employee who has use of it, so that junior employees will not have the spending power of more senior staff.
- These cards come with management reporting features such as monthly itemised purchase listings that allow easier tracking of expenditure for budgetary and tax purposes
- Credit cards designed for business use may also offer complimentary features such as general and business-specific insurances, and banking discounts
- A typical business credit card functions in the same way as a personal credit card does. You can use it to buy things offline, online, withdraw money from an ATM and pay by phone.
What is there to choose between them?
As this might be the main means by which a company makes its purchases, the key factor will most likely be the acceptance of the business credit card. In other words, a card that is rejected because the merchant does not accept it is going to be a problem. This is no different to the situation with personal credit cards, where a card carrying the Visa or MasterCard logo is more widely accepted than one with the American Express marque on it. Of course, Amex cards designed for business can have their own perks, such as lucrative rewards programs, extra features and greater kudos. For this reason, many business owners may opt to carry an Amex and one of the others to cover all the bases.
Aside from this, the obvious feature to check is the interest rate, or APR. This is especially relevant if you are going to be spending a lot on your card and will not be paying it off in full each month. Remember also to check the annual fees and transaction fees involved, plus any penalty charges and in what circumstances they are applied. It is important that you check the terms and conditions of any credit card you carry, but where a credit card designed for business use is concerned, it simply must be done. Check also to see how easy it is to access your account online, the kind of fraud protection measures that apply, and if there is a zero liability guarantee against fraudulent use of the account. Find out also what sort of insurances are included with the card, and how does the customer support stand up to scrutiny?Back to top
Corporate vs Business card cards
These two types of card are not the same, and it’s is important to know how they differ so you can decide which one will best suit your venture.
Corporate credit cards
Corporate credit cards are designed for larger firms and corporations, and the features of these cards can be tailored to meet the needs of the specific business. This will involve the business owner and executive staff having a face-to-face meeting with a representative of the card provider to hammer out the details. For this reason, the business credit card you will see advertised by your bank or on a comparison site will not be a corporate credit card. To find out about this service will require that you make a personal enquiry at the bank or card company of your choice.
Small Business Credit Cards
This is the business credit card you will see advertised, and this is the popular choice with the small to medium sized business, or for the sole proprietor or business person working from home. Applications for a card of this sort are done in the same way as you would apply for a personal credit card. The easiest and fastest way to do this is with an online application. It goes without saying that a good credit rating will be needed for an approval.
Using your card wisely
As with any credit card, a card designed specifically for business speeding is only as good as the use it’s put to. Here are a few tips to bear in mind:
- Limit how many cards you have - The more cards you have in circulation amongst your staff, the higher the risk of debt building up. Keep the number of cards as low as you can to guard against this.
- Use your interest-free period – This is the period in which you are not charged interest from the time the purchase is made until the day the balance is due. If you take advantage of this and then pay your bill off in full, you will have effectively enjoyed an interest-free short-term loan, which is something you can do every month with careful planning.
- Don’t use your card as a debit card – This means that you should not use your card to withdraw cash from ATMs, or for any other transaction that is deemed a cash advance. Cash advance transactions do not enjoy an interest-free period and are charged interest from the moment they happen, and the applicable interest rate is usually higher than the purchase rate.
- Pay on time – The best bet is to pay in full on the due date to avoid any interest charges. Failing that, at least the minimum payment must be met, and it must reach the card company before the due date or a penalty will be charged.
ABN’s and Business Credit Cards
Most business owners are short on time. Let’s face it, when it comes to doing a credit card comparison you probably have other things to worry about than running from lender to lender to find the best deal. The thing is that those entrepreneurs who do spend time to look into their options often save money opposed to their competitor who is too slack to research the market.
Most banks and lenders offer their customers a credit card that is designed for business purposes. By doing some research online you’ll soon see which of the offers apply to your needs. Once you have a short list of applicable business credit cards it’s time to drill down into the meat of things.
Getting Started With Business Credit Cards
If you are looking for a loan for your small business financing, consider a credit card. Many business owners use these cards because resources need to be obtained first and then paid for at a later date. The nice thing about using a credit card is there is a grace period where no interest is added. This means that as long as you get the funds back within this designated time, you will have no interest to pay at all.Back to top
Considerations for choosing a credit card for your business
Owning a credit card, whether it’s for business or personal use, means taking responsibility for the card itself. Here are some of the considerations you must keep in mind when you apply for or comparing credit cards that you plan to use for your business.
When you’re looking at the different credit cards that are available you need to put aside what you would want in a card for your personal day-to-day life and only think of your business. As an individual you may be able to make regular payments on your card balances every month and not have to carry a balance over. Your business may not be able to do this especially if you are using it to finance purchases on a large scale when the business is starting. In this case you would look for a card with a low interest for purchases, and an extended grace period.
You should also take a look at that rewards program that is being offered on each card, especially if there are future business trips scheduled. Getting a credit card that offers travel rewards or complimentary travel insurance can save your business a lot of money down the road.
There are a lot of benefits associated with small business cards for both new and established companies. Here are some of the main reasons why you may want to look at getting a credit card for your company.
- Credit cards designed for business use often give a higher credit limit than personal cards, which makes them ideal for a company that has high business expenses.
- Having a business card keeps your company finances as a separate entity. It is best to keep personal finances and business finances separated at all times so that there is no confusion when tax time rolls around.
- You’ll have more convenience when you have a credit card for business purchases since you will be able to place orders by phone or on the Internet. You can get extra cards for employees that are going to be making purchases and you don’t have to worry about writing checks or having large cash amounts available in the office.
When you are applying for or comparing a credit card that is meant for business purposes, look at the interest and fees on the card and find out if there is a rewards program on it. Ensure you do a credit card comparison online, to find one with the best features with a low rate if you have a lot of business expenses and pick the best card suitable for your business.
Establishing a credit history
A new business that is starting out will have no credit history attached to it in most cases. A credit card is one way to establish a positive credit history so that you can apply for more credit quickly as your business expands. Banks and other financial institutions will start taking your business seriously once they see that you have established good credit and are a good risk.
To keep your credit score in line, you must always make sure that payments are made on time every month. While you are first starting out, you may have situations arise and only be able to make the minimum payment from time to time. This is fine as long as that amount is paid and is on time. Making a minimum payment ensures that your credit score remains healthy.
Any business owner can tell you that one of the worst things about owning a new business is the administration work that goes along with it. It can really be a nightmare trying to keep all the paperwork organised, especially if the business is new and no system has been put into place yet. A credit card can keep records simply and efficiently.
Every time a statement arrives, the paperwork is basically complete. If you use the credit card primarily for your business purchases and expenditures, all your records are there.
Business Debit Cards
Debit cards are a very prudent way to do business. Essentially they operate on one very simple principle — they do not allow your business to spend more than it can afford.
Because business debit cards’ buying power are determined by the balance of a business’s checking account, theoretically, the limit to the buying power of the credit card is the limit of the capital available to the business at the time. This is a very responsible way to conduct business as well as your personal financial life.
Though this keeps a business’s record books clear of debt, it severely limits the buying power of a business to the cash available to them at any time. It can take time, too much time, to save enough cash for a business to make a formidable investment in growth.
How then can a business gain access to more capital? Credit cards designed for business use are certainly a solution for all entrepreneurs to consider.Back to top