Business Credit Cards

How do business credit cards work?

A business credit card is different to a personal credit card (the one you’d use to buy the family TV) because it’s tied to your business or company rather than your own finances.

They have business-style perks and keep your finances separate, but they actually offer tons more value for business owners, like:

• Earning rewards points or even cashback on purchases and paying bills
• Managing cashflow during seasonal ups and downs
• Employees can have their own card, keeping transactions in one place
• Keeping your finances separate, and tax time easier

No matter how old or new, or how big or small your company is (it could be just you on the payroll), a business credit card can help squeeze more mileage out of your expenses, and streamline your business.

What’s the difference between a business charge card and a business credit card?

Some business credit cards are a charge card, which differs from a regular credit card that has spending limits and charges interest.

A credit card allows you to carry a balance over from month to month, where a charge card requires you to pay it off in full each statement period.

The benefits of a charge card are uncapped spending, and no interest to pay because you’re paying the balance to zero each month. Charge cards are less common these days, but do boast some good features and bonuses if that’s what you’re looking for.

Check the review for details on each card and whether it’s a charge card, or regular credit card.

Having separate cards makes it easier to keep track of purchases, transportation, supplies, sales and other necessities involved in running a small business. Record keeping for tax purposes will be that much simpler with cards which are individually designated for business purposes. Household and personal budgets are much easier to manage when kept apart from small business enterprises.

Business Credit Card or Corporate Credit Card?

Before we delve any deeper into the world of business credit cards, let’s take time out to discuss the difference between a business credit card and a corporate credit card.

Business credit cards are typically designed to be used by small to medium sized business, generally with up to 100 employees. The tools on offer are skewed towards the needs of these smaller businesses, with rewards earned in categories that smaller business owners are more likely to purchase in.

Meanwhile, corporate credit cards are designed to be used by larger companies and corporations with a much higher annual revenue, often with hundreds, or even thousands, of employees. These cards offer integration into corporate accounting software, and often come with a designated customer service representative and other perks more suited to corporate use.

If you're running a large business and need to manage expenses of many departments, it might be time to consider an expense management card. These accounts offer you a way to handle employee expenses and payment.

Business Credit Card Eligibility

Okay, so a corporate credit card may not be for you – but is a business credit card? Let’s look at eligibility requirements first. Just like personal credit cards, business credit cards come with certain eligibility requirements, as set out by the card provider.

For the most part, you will need an ABN to apply. That means, depending on the card, you may be eligible to apply even if you’re a sole trader, a freelancer, an owner of a micro business, or you have a side hustle.

In terms of income requirements, most cards require you to be able to prove some sort of income from your business for you to qualify so they know you can make the repayments. Other cards come with much higher income requirements. American Express, for example, requires an annual business revenue of $75,000 or more to be eligible for its business cards.

To give you an idea of what other factors providers may look at when you apply for a business card, here are the eligibility requirements of American Express beyond that income criteria. Applicants must:

• Be over 18 years of age,
• Be an Australian citizen or a permanent resident,
• Have a good credit history and no payment defaults,
• Have a valid ABN registered for GST.

Meanwhile, NAB has the following requirements regarding eligibility for its business cards. Applicants must:

• Be a sole trader, a business partnership with no more than two individual partners, a company with five or less directors, or a trustee of an eligible trust. Joint borrowers who are not partnerships, or partnerships where one or more partner is a company are not eligible to apply.
• Be at least 18 years old and hold an Australian citizenship or permanent residency.
• Be registered for GST, and have a turnover of at least $75,000 per year.
• Have been in operation for at least 12 months, and have a valid ABN.
• Have a business and residential address in Australia.
• Intend to use the card where the purpose is wholly or predominately for business purposes.
• Have all ATO payments and loan repayments up to date.

What are the top benefits of a business credit card?

Business credit cards are a handy tool for simplifying and streamlining your expenses. Here’s some of the benefits:

• Control your cashflow year-round. Business credit cards help you manage cashflow, by paying for larger purchases or bills over time, which is especially helpful if your business has seasonal ups and downs. Or, you can take advantage of interest free days and pay the balance off each month to keep on top of your expenses and pocket the rewards you’ve earned.
• Separate business and personal finances. Using a business credit card for your work-related transactions makes life much easier at tax time and side-steps money confusion.
• Give your employees their own card. Your employees can be issued with cards (with caps to control their spending) to pay for fuel and expenses. That means no more loose petty cash or those vintage slips of paper we called ‘cheques’. All your outgoing transactions are logged in one account.
• Business tools and features. Depending on the card, you could be offered a number of handy business tools, like easy exporting of data to accounting software like MYOP and Xero, and business budgeting apps. Your card might include complimentary travel insurance, concierge services, airport lounge access and flight upgrades for frequent business travellers. There are also discounts and deals with partnering businesses attached to some cards.
• Earn rewards on business spending. You could earn rewards points on your business expenses paid for on your card, that can turn into free flights and accommodation, merchandise and services. Check the rewards earn rate on the comparison tool to find out how many points per dollar are on offer. Read the full review and the card’s PDS, because some conditions do apply to earning rewards, like annual or monthly caps.
• Get a big rewards hit with introductory offers. Many lenders offer bonus rewards points when you sign up, which can go a long way towards flights, merchandise and gift cards – all of which boost your business’s cashflow. You’ll usually need to hit a minimum spend within 90 days or so to unlock the bonus rewards points.

How do you choose the best business credit card for your business?

Before you compare cards, first think about what your business needs and what kind of spending and repayment patterns you have.

Here’s some questions you can ask yourself, and we’ll unpack each one next.

• What are my average expenses each month, and what credit limit would I need to suit?
• Am I planning to have a balance on the card month-to-month, or pay it off regularly?
• Do I want a low fee credit card to keep interest costs down?
• Will it be helpful to earn rewards points on my expenses?
• Would it be helpful to have free insurances included?
• How many of my employees would need a credit card?

Use your answers as a benchmark for your priorities. Let’s look at the different business credit card factors in more detail:

• • How many cardholders does it allow?

Some business cards limit the number of cards that can be attached to one account.

• • Are there costs per cardholder?

Some lenders hand out additional cards for free, and some charge an annual fee per card. This may be on top of the annual fee of the business credit card, so make sure you check both the cardholder fees and annual fee to get a full picture of the ongoing costs.

• • What are the card’s features?

Business credit cards can be basic (generally with a lower annual fee) or bursting with features. Think about what you and your employees need from the card, and weigh up if the value of the features is greater than the ongoing fees.

Features to look for are:

• • • Rewards: if you want to earn rewards on your business spending, choose a business credit card that offers the most value back on the spending you do most often. Think about the type of rewards you want to earn, whether that’s flights with a certain operator, or products and gift cards that the company can use.
    • Freebies and discounts: some card providers include complimentary travel insurance, baggage protection, car rental insurance and more with a business credit card. There are also some other deal-sweeteners like discounts with tech companies and cashback offers on your card.
    • Functionality: Whether you want to export your card data to a particular accounting software brand, or track and limit individual cardholder spending in real time, check out the functionality on offer and match that to your business needs.

What fees and interest will you pay?

As well as any cardholder fees and annual fees, you’ll need to check other common credit card charges that might apply. For example, if you make a lot of overseas transactions, you might want to look for a card that charges low or no foreign transaction fees.

Most importantly, think about the purchase rate on the card. That’s the interest charged on any unpaid balance.

If you think you’ll carry a balance month-to-moth, you may prefer a low rate card to help you save on interest. Or, if you’re planning to clear the balance each month, look for cards that offer interest free days on purchases.

Remember, a charge card requires that you pay the balance in full each month.

How can you make the most of your business credit card? (and what should you avoid)

First, choose a card that benefits you most and is ‘fit for purpose’. Where will the card be used and will it be accepted in those places? If you choose a card that offers great rewards points, find one that gives you the most bang for every buck you spend.

Next, keep track of spending, especially if your employees have cards. You can put a limit on the amount they can use, but it’s still a good idea to keep an eye on the transactions to stay on budget.

If it’s available, use features like exporting directly to finance managing software to run a tight ship on spending.

What To Look For In A Business Credit Card

It’s safe to say that while the American Express Platinum Business Card certainly has its appeal, it’s not going to suit every business owner. The key to choosing a business credit card – just as it is for choosing a personal credit card – is to find the card that matches your needs, your spending and repayment habits, and your budget.

Here are some questions to ask as you compare business cards.