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.
Business Credit Cards - Frequently Asked Questions
Most business cards are credit cards, however, there are some that function as charge cards, most notably within the American Express range. While they look the same, and in many ways act the same, charge cards are slightly different in that they don’t allow you to carry a balance (the balance must be paid off in full at the end of each month). Charge cards may also have no set spending limit.
Sole traders and the self employed, and small business owners through to large companies can use a business credit card if they meet eligibility criteria and it suits their business.
They can be a great option if you want to empower your employees, track your costs, and earn rewards points on your business expenses. The variety of purchase rates (the interest charged on transactions), interest free days, annual fees, rewards and other bonuses on offer from different lenders means you can usually find one that suits how your business runs.
However, you may not need one if your business is very small or just starting out, and it’s easy for you to keep your business-related finances separate.
If you decide to get one, you’ll need to compare the range of business credit cards to find one that suits your cashflow.
For instance, if you don’t have many expenses to pay just yet, you might look for a low interest, low fee card rather than one that earns big rewards points for money spent and has a higher annual fee as a result.
Or, if you have the kind of business that involves buying expensive supplies, like a building company, you might want to look at the rewards earn rate (the points you earn per dollar spent that can be used to get free products or services, or used as frequent flyer points).
It’s worth noting that annual fees on a business credit card can usually be claimed as a tax deduction, but check with your accountant to make sure.
Having your application accepted, and the limit to what you can spend on the card (the credit limit), will come down to your business’s profit and loss, and the lenders application criteria.
Each card listed here in our comparison guide comes with a full review and listing of its features to help you find the best business credit card for what you need. Make sure you read the fine print before applying so you understand what you’re getting.
Useability is an important aspect of a business credit card. It is essentially a business tool, which means it needs to be fit for purpose. In terms of using the card day to day, you would need to consider whether the card can be used to cover the costs of the business.
As an example, you may want to think about the card’s credit limits and the number of additional cardholders on offer. If you opt for an American Express card, you’d want to consider Amex acceptance, as well as the cost of that acceptance, where surcharges for accepting Amex may be higher than that of Visa or Mastercard.
Think about what you want out of your credit card. If you need employees to be equipped with a card, look at how many cardholders are included and any costs attached.
If you’re looking to control cashflow, consider a low rate, low fee card with interest-free days.
If rewards are your goal, and you have high expenses that will earn decent points that can turn into flights, travel, gift cards and products, sort the cards by rewards points.
Remember, annual fees are usually higher for rewards cards, but those fees are often tax-deductible too (always check with your accountant). Charge cards often have high annual fees.
Click the toggles on our comparison tool above to sort the cards by name, rewards, introductory offers, and annual fees. Click each card to see a full review and rundown of its features.
When you’ve found the card you want, click ‘Go to offer’ to be directed to the provider’s application page. The application process typically takes around ten minutes, and you’ll need to provide proof of your identification, income and other details to complete the application.
You’ll most likely need an ABN to be approved for a business credit card, and some providers might want you to be registered for GST, too.
If you’re a sole trader, self employed or have a fledgling business, you might find a personal credit card is enough until your business grows. The volume of your transactions, revenue and expenses can help you decide whether you can separate them easily from your personal finances, or whether a business credit card will make life easier.
You’ll need to have an ABN (Australian Business Number) to apply for a business credit card as a self employed person or sole trader, as well as other supporting documents like bank statements to apply.
Unlike personal credit cards, which place sole liability on the primary cardholder, business cards may offer a choice of liability structures. Joint and several liability can allow business owners to share liability, while with business liability, the business is held liable.
Most business credit cards offer itemised statements for each additional cardholder, making it easy to track and monitor cardholder spending. However, you may look for additional tools, such as the ability to switch card features on and off for each cardholder, allowing or not allowing the ability to use the card online, to withdraw cash, to spend overseas and more.
Bonus points can create serious value within a card, but there are some important factors to keep in mind before you let those bonus zeros carry you away. Read the small print to find out how much you will need to spend to get your hands on the bonus points offer, and make sure you can afford to pay back that spend before it starts accruing interest.
You may also find that you need to be new to the card provider – as in, not a current or previous cardholder – to be eligible for the points bonus.
Other intro offers worth watching out for include reduced annual fees, purchase offers and, occasionally, balance transfer offers.
It’s easy to get swept up in the promise of extras, but not every business needs them. As such, it’s not worth paying for them. Extras should create value, making the card more useful to your business. However, extras – and rewards – come at a cost, so you need to make sure the extras on offer provide more value in dollar terms than you pay out in annual fees.
Here’s a snapshot of some offers by different business credit card providers. You’ll need to check our review of the card and the card’s PDS and TMD before you apply to make sure you understand what your credit card offers, as each one is different.
- Bonus introductory Rewards Points on approval of application
- Accounts Manager to help you get the most from your card
- Travel and baggage insurance
- Free airport lounge access
- Memberships with hotel and dining partners
- Complimentary subscriptions to affiliate apps
- Extra points earned by spending at partnering business
- 24/7 concierge service
These features are a general guide and are not available on every card. Make sure you read the fine print before applying.
You may find business cards tend to come with higher annual fees than their personal card counterparts. As we mentioned, it’s important to make sure that what you get out is more than you put in in terms of value. However, you may also find that the costs associated with keeping a business credit card can be tax deductible.
And interest? Business credit cards charge interest on balances carried over. While there are low rate options on the market, it’s best to avoid paying interest whenever possible by clearing your balance at the end of the month. It’s worth noting that not all business cards offer interest free periods on purchases, so this is something to look out for as you compare options.
Businesses can usually claim the annual fee on a credit card, but always check with your tax accountant first to make sure. There are other benefits to a business credit card at tax time, too.
Again, this is about making sure the card is fit for purpose. If you use a certain accounting software, for example, you’ll want to choose a business card that allows you to automatically export data to that software, while perhaps providing extras such as spend categorisation.